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North Carolina
Biennial Tax
Expenditure Report
2013
Revenue Research Division
North Carolina
Biennial Tax
Expenditure Report
2013
Revenue Research Division
North Carolina Department of Revenue
December 2013
275 copies of this report were printed at a cost of $613.25 or $2.23 per copy.
Table of Contents
Introduction ................................................................................................................................................. 1
Defining Tax Expenditures for this Study ................................................................................................. 1
Measuring the Fiscal Effects of Tax Expenditures .................................................................................... 2
Updates to the Tax Expenditure Report Since 2011 .................................................................................. 7
Tax Expenditures That Have Been Substantially Altered ......................................................................... 7
Extended Sunset Dates .............................................................................................................................. 8
New Tax Expenditure Provisions .............................................................................................................10
Repealed and Expired Tax Expenditures ..................................................................................................11
Privilege Taxes (Article 2) ...........................................................................................................................20
Tax Base Information ...............................................................................................................................20
Exemptions from license fee of $50 for attorneys-at-law and other professionals ...................................20
Exemptions from bank privilege tax .........................................................................................................21
Exemptions from $15 per ton tax on un-recycled newsprint ....................................................................21
Tobacco Products Tax (Article 2A) ...........................................................................................................22
Alcoholic Beverage License and Excise Taxes (Article 2C) .....................................................................24
Franchise Tax (Article 3) ............................................................................................................................26
Brief Description and Tax Base Information ............................................................................................26
Exemptions ..............................................................................................................................................26
Deductions ...............................................................................................................................................29
Tax Credits ..............................................................................................................................................32
Corporation Income Tax (Article 4, Part 1) ..............................................................................................33
Brief Description and Tax Base Information ............................................................................................33
Exemptions ..............................................................................................................................................34
Deductions ...............................................................................................................................................36
Tax Credits ..............................................................................................................................................44
Business and Energy Tax Credits (Article 3B) .........................................................................................48
Tax Incentives for Recycling Facilities (Article 3C) .................................................................................52
Historic Rehabilitation Tax Credits (Article 3D) ......................................................................................53
Low-Income Housing Tax Credits (Article 3E) ........................................................................................54
Research and Development Credits (Article 3F) ......................................................................................55
Mill Rehabilitation Tax Credit (Article 3H)..............................................................................................57
Tax Credits for Growing Businesses (Article 3J) .....................................................................................58
Tax Incentives for Railroad Intermodal Facilities (Article 3K) ..............................................................60
Individual Income Tax (Article 4, Part 2) .................................................................................................61
Brief Description and Tax Base Information ............................................................................................61 Table of Contents
ii
Exemptions ..............................................................................................................................................62
Deductions ...............................................................................................................................................62
Tax Credits ..............................................................................................................................................65
Sales and Use Tax (Article 5) ......................................................................................................................69
Tax Base Information ...............................................................................................................................69
Exemptions ..............................................................................................................................................74
Refunds ..................................................................................................................................................101
Preferential tax rates ...............................................................................................................................106
Highway Use Tax (Article 5A) ..................................................................................................................107
Tax Base Information .............................................................................................................................107
Tax Expenditures ...................................................................................................................................107
Scrap Tire Disposal Tax (Article 5B) .......................................................................................................111
White Goods Disposal Tax (Article 5C)...................................................................................................112
Taxes on Insurance Companies (Article 8B) ...........................................................................................113
Excise Tax on Conveyances (Article 8E) .................................................................................................115
Excise Tax on Motor Fuels (Article 36C) and Alternative Fuels (Article 36D)....................................117
Tax Base Information .............................................................................................................................117
Tax Expenditures ...................................................................................................................................117
Appendix A: Federal Tax Expenditure Flow-Throughs ........................................................................123
Appendix B: Other Tax Exclusions and Exemptions .............................................................................127
Index ..........................................................................................................................................................136
List of Tables
Table 1. Summary of Tax Expenditures ......................................................................................................... 3
Table 2. Forty Largest Tax Expenditures ....................................................................................................... 4
Table 3. Sales and Use Tax Expenditures .................................................................................................... 70
North Carolina Biennial Tax Expenditure Report
2013
In compliance with the requirements of Section 105-256 of the General Statutes of North Carolina, the Department of Revenue has prepared this report of tax expenditures contained in the Revenue Laws of North Carolina as amended through 2013. The listing of expenditures and measurements of their respective costs will allow legislative review of their impact on the State’s economy and on government revenues.
As in past publications, tax expenditures for each State-level tax are presented in a chapter of this report. At the beginning of each chapter, some basic information of the tax base and normal State tax rates for relevant fiscal years is presented. Each tax expenditure provision includes a General Statutes citation, a short description of the tax expenditure, and a “Data Source” that notes the source of the data used for the estimate. Also, many of the tax expenditures have a “Note” that details some additional information pertinent to the estimation of that particular tax expenditure. This information is to provide context for the estimates, and is not intended to represent the official interpretation of the Department of Revenue.
In this year’s report, we have added information on the “enacting legislation” related to each tax expenditure, as available. These notes attempt to provide the session laws that first incorporated each of the tax expenditures into statute. In some cases, additional notes are given referring to prior treatment of a provision or substantive changes that have occurred subsequent to the initial enactment. However, it was not in the scope of this report to provide a comprehensive history of every provision. (Many of the older provisions are only followed back to the major re-codifica-tion of the tax laws in S.L. 1939-158.)
Many of the tax expenditure provisions have sunset dates. Notes have been added to this year’s report to provide the current sunset dates attached to each provision, when applicable. This report includes any tax expenditures that are scheduled to sunset after December 2013.
Estimates of the cost of tax expenditures are provided for Fiscal Year 2013-14 and Fiscal Year 2014-15. The latter year was added to the report to provide a full-year impact of the many tax law changes that take effect in 2014.
A tax expenditure is defined as an exemption, exclusion, deduction, allowance, credit, refund, preferential tax rate or other device that reduces the amount of tax revenue which otherwise would be collected.
Tax expenditures are created to give economic assistance to certain groups of producers or consumers in the economy or to promote other policy goals. This report does not purport to evaluate the various expenditures as to equity or desirability from a public policy standpoint.
Introduction
2
Some tax expenditures are necessary. For instance, Constitutional restrictions forbid taxing the federal government’s purchases, as well as certain transactions involving interstate trade and commerce on Indian Reservations. Also, there are specific exemptions or exclusions that are made in order to avoid duplicate taxation of an activity. For example, S-corporations are not taxed on profits that are transferred to shareholders, who subsequently pay income taxes on these dividends. Also, some exemptions and exclusions that are necessary to define the appropriate tax base are not considered in the main body of this report. These types of tax expenditures are listed in Appendix B. No cost estimates are provided for these.
The sales tax presents the most ambiguous cases of when exemptions should be included as tax expenditures for this report. The sales tax is generally considered to be a tax on “final” purchases. Transactions involving the purchase of intermediate goods that will be further processed into a final good are properly exempted from the sales tax. It is arguable whether purchases of machinery, fuel or similar inputs used in production of final goods should be taxed. Since there is no consensus on this point, we include estimates of tax exemptions on inputs that are not used up in the production process. Sales tax exemptions that are excluded from estimation are included in Appendix B.
The term “preferential tax rate” has been interpreted to mean any rate that is less than the basic rate that applies to the largest number of taxpayers. In some instances higher rates are used on a relatively small number of taxpayers. In such cases, the lower general rates are not listed as preferential. Also, no preferential status is acknowledged when distinctly different bases are taxed at different rates under the same tax category. For example, under the alcoholic beverage taxes, different rates and bases are used to tax beer, wine, and spirituous liquor.
It should be noted at the outset of this report that the fiscal effects of tax expenditures are sometimes difficult to quantify. Several methods for estimating the costs of expenditures are used.
The most accurate source of information comes from actual tax returns that provide direct evidence of when certain expenditures are taken and the amounts of those expenditures. For example, we are able to use personal income tax and corporate income tax returns from 2009 and 2008 respectively to precisely measure the use of certain tax deductions and tax credits.
Sometimes, needed data are more timely and extensive at the national level than at the state level. When this occurs, the state-level data are estimated by determining North Carolina’s share of national activity. In these cases, several assumptions must be made to derive the final estimates. Therefore, these estimates are less reliable than those that can be measured directly.
For most national economic data, the share of North Carolina’s activities will consistently be in the range of 2.8% to 3.1%, which corresponds to North Carolina’s share of gross domestic product (GDP) and population. Therefore, national statistics are often multiplied by one of these percentages to estimate North Carolina’s value. However, when it is apparent that North Carolina’s data are not typical of national activity, such as textile or pharmaceutical manufacturing, attempts are made to use more representative proportions.
In some cases, sufficient data were not available to allow estimation of the value of an expenditure. In these cases, the expenditure estimate is designated as “unavailable.” Introduction
3
Table 1
Summary of Tax Expenditure Estimates for FY 2014-15 by Tax Category
Tax
Number of Tax Expenditures
Sum of Estimates of $100,000 and Over (Millions of Dollars)
Number Estimated to Be Less than $100,000
Number with Unavailable Estimate
Privilege Tax 6 0.3 4 0
Tobacco Products Tax 5 5.4 1 1
Alcoholic Beverage Tax 5 3.2 1 3
Franchise Tax 25 353.3 1 12
Corporation Income Tax 44 330.0 15 10
Various Tax Incentives
(Articles 3B through 3K) 25 261.8 6 2
Individual Income Tax 16 2,328.4 6 2
Sales and Use Tax 105 3,378.6 7 28
Highway Use Tax 15 144.2 0 10
Scrap Tire Disposal Tax 2 0.6 0 1
White Goods Disposal Tax 1 0.0 1 0
Taxes on Insurance
Companies 6 189.2 0 1
Excise Stamp Tax on
Conveyances 8 0 0 8
Excise Taxes on Motor Fuels 20 77.8 3 1
Totals 283 7,072.8 45 79 The sum of the estimates is provided for comparative purposes only. It should not be interpreted as the total gain to state revenue from eliminating all tax expenditures listed in this report. The total impact may be larger or smaller than this amount, depending on the interactions of the various tax expenditures.
The fiscal year 2014-15 Federal income tax expenditures that flow through to North Carolina income taxes are estimated in Appendix A. The individual income tax provisions total $5,195.0 million; the estimates for the corporate income tax provisions (excluding accelerated depreciation of equipment) total $152.5 million.
Introduction
4
Table 2
Forty Largest Tax Expenditures in North Carolina in FY 2014-15
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
1
Individual Income Tax
2
153.5(a)(1)
Standard Deduction in Excess of Base Amounts
1,233.1
2
Sales & Use Tax
80
164.13B
Food for Home Consumption
720.5
3
Sales and Use Tax
21
164.13(13)
Prescription Drugs and Insulin for Human Use
523.1
4
Sales and Use Tax
37
164.13(32)
Motor Vehicle Exemption Less Highway Use Tax
517.4
5
Individual Income Tax
3
153.5(a)(2)
Itemized Deduction in Excess of Standard Deduction
486.6
6
Individual Income Tax
6
153.5(a)(3)
Social Security Benefits in Excess of Federal Limit
383.9
7
Individual Income Tax
7
153.5(b)(5)
Government Retirement Income under Bailey Decision
366.8
8
Sales and Use Tax
9
164.13(5a)
Items Taxed by Article 5F
223.1
9
Sales and Use Tax
93
164.14(b)
Refunds to Nonprofits
221.0
10
Individual Income Tax
11
153.10(a)
Credit for Children
178.2
11
Sales and Use Tax
87
164.13E(6)a
Feeds, Litter and Medications for Farming
174.3
12
Taxes on Insurance Premiums
2
228.5(c)(2)
Premiums Received from Annuities
147.5
13
Corporation Income Tax
13
130.5(b)(4)
Net Economic Loss Carryforward
143.7
14
Franchise Tax
25
120.2(b)(1)
Cap for Holding Companies
135.0
15
Franchise Tax
2
125(a)(1)
Charitable Nonprofits
128.8
Introduction
5
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
16
Sales and Use Tax
66
164.13(57)
Piped Natural Gas Used by Manufacturers
116.4
17
Sales and Use Tax
29
164.13(23)a
Packaging Items for Manufacturers
113.7
18
Sales and Use Tax
56
164.13(51)
Water Delivered Through Main Pipes
108.9
19
Highway Use Tax
3
187.3(b)
Trade-In Allowance on Sales of Motor Vehicles
106.3
20
Sales and Use Tax
65
164.13(57)
Electricity Used by Manufacturers
92.3
21
Sales and Use Tax
95
164.14(c)
Refunds to Certain Local Government Entities
84.8
22
Sales and Use Tax
20
164.13(12)
Durable Medical Equipment
77.5
23
Tax Credits for Growing Businesses
2
129.88
Credit for Investing in Business Property
60.4
24
Business and Energy Tax Credit
1
129.16A
Credit for Investing in Renewable Energy Property
58.3
25
Sales and Use Tax
10
164.13(5b)
Telephone Equipment
57.5
26
Corporation Income Tax
1
130.4
Double-Weighting of Sales Factor in Apportionment Formula
49.9
27
Franchise Tax
9
125(a)(9)
Other Organizations Exempt from Federal Income Tax
48.6
28
Individual Income Tax
4
153.5(b)(1)
N.C. and Nonprofit Education Institution Interest
42.5
29
Research and Development Credit
5
129.55(a)(3)
Other R&D Credit
42.1
30
Low-Income Housing Tax Credits
2
129.42
Credit for Low-Income Housing Awarded on or after Jan. 1, 2003
41.0
Introduction
6
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
31
Sales and Use Tax
83
164.13E(2)
Fertilizers, Seeds and Related Items Sold to a Farmer
37.6
32
Corporation Income Tax
43
130.47
Film Industry Production Expenses
36.6
33
Excise Taxes on Motor Fuels
6
449.88(8)
Sales to County or Municipal Corporation
34.5
34
Tax Credits for Growing Businesses
1
129.87
Credit for Creating Jobs
25.5
35
Highway Use Tax
1
187.3(a)
Maximum Tax of $1,000 for Class A or Class B Commercial Motor Vehicles
24.8
36
Sales and Use Tax
84
164.13E(3)
Farm Machinery and Related Parts and Lubricants
23.3
37
Corporation Income Tax
11
130.5(b)(3a)
Dividends from Foreign Sources
22.6
38
Sales and Use Tax
82
164.13E(1)
Fuel and Electricity for Farming
22.0
39
Sales and Use Tax
30
164.13(23)a
Packaging Items for Retailers
21.7
40
Corporation Income Tax
32
130.6A(e)
Expenses Related to Untaxed Dividends for Bank Holding Companies
21.2
Report Updates
7
This section highlights changes to this report since the last publication in December 2011. These changes are listed in the following categories:
1. tax expenditures that have been substantially altered
2. tax expenditures that have had their sunset dates extended
3. new tax expenditures enacted
4. tax expenditures that have expired or been repealed
In several of the entries below, a brief description of the changes to the tax expenditure is provided. For a more complete description, see the annual “Tax Law Changes” publication located on the North Carolina Department of Revenue website.
1. Standard deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(a)(1)
Description of Changes: For tax years beginning on or after Jan. 1, 2014, standard deduction amounts have been increased. For single filers, the standard deduction amount increased from $3,000 to $7,500; for married filers, filing jointly, the standard deduction increased from $6,000 to $15,000; for heads of households, the deduction increased from $4,400 to $12,000.
2. Itemized deductions
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(a)(2)
Description of Changes: For tax years beginning on or after Jan. 1, 2014, itemized deductions have been limited to three components: (1) charitable deductions, (2) mortgage interest; and (3) real estate property taxes. The sum of the latter two deductions cannot exceed $20,000.
3. Child credit
Tax Category: Individual Income Tax
Citation: G.S. 105-153.10(a) – formerly G.S. 105-151.24
Description of Changes: For tax years beginning on or after Jan. 1, 2014, an additional $25 credit per qualifying child is allowed for taxpayers whose AGI is equal to or less than the following amounts by filing status: $40,000 for married filers, filing jointly; $32,000 for heads of households; $20,000 for single filers or married filers, filing separately.
4. Earned income tax credit
Tax Category: Individual Income Tax
Citation: G.S. 105-151.31
Description of Changes: For taxable years beginning on or after January 1, 2013, the NC earned income tax credit is reduced from 5% to 4.5% of the federal EIC. Also, the sunset has been extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36 for sunset extension and S.L. 2013-10 for rate reduction)
Report Updates
8
5. Credit for adoption expenses
Tax Category: Individual Income Tax
Citation: G.S. 105-151.32
Description of Changes: For taxable years beginning on or after January 1, 2013, the NC adoption tax credit is reduced from 50% to 30% of the federal adoption credit. Also, the sunset has been extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36 for sunset extension and S.L. 2013-10 for rate reduction)
6. Renewable fuel facilities credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16D
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
7. Biodiesel producer credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16F
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
8. Work opportunity tax credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16G
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
9. Historic rehabilitation credits
Tax Category: Historic rehabilitation tax credit
Citation: G.S. 105-129.35 & G.S. 105-129.36
Description of Changes: The sunset is extended to tax years beginning before January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-36)
10. Mill rehabilitation credits
Tax Category: Mill rehabilitation tax credit
Citation: G.S. 105-129.71 & G.S. 105-129.72
Description of Changes: The sunset is extended to tax years beginning before January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-36)
11. Research and development tax credits
Tax Category: Research and Development Credits
Citation: G.S. 105-129.55
Description of Changes: The sunset is extended to tax years beginning before January 1, 2016. Previously, the sunset date was January 1, 2014. (S.L. 2013-316)
Report Updates
9
12. Article 3J tax credits
Tax Category: Tax Credits for Growing Businesses
Citation: G.S. 105-129.87, G.S. 105-129.88 & G.S. 105-129.89
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
13. Credit for premiums paid on long-term care insurance
Tax Category: Individual Income Tax
Citation: G.S. 105-151.28
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
14. Film production credit
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.47& G.S. 105-151.22
Description of Changes: The sunset is extended to qualifying expenses occurring on or after January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-194)
15. Oyster shell recycling credit
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.48 & G.S. 105-151.30
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
16. Credit for qualified business investments
Tax Category: Individual Income Tax
Citation: G.S. 105-163.011
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
17. Passenger air carrier refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(1)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
18. Business in low-tier area refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(3)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
19. Aviation fuel for motorsports refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(4)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
Report Updates
10
20. Professional motor racing vehicle parts refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(5)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
21. Analytical services business refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(6)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
22. Certain industrial facilities refunds
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14B(b)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
23. Deduction for Eugenics Sterilization Compensation Fund
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(b)(9)
Effective Date: Jan. 1, 2015. (S.L. 2013-360)
24. Exemption for service contract on exempt items, other than motor vehicles
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(61)
Effective Date: Jan. 1, 2014. (S.L. 2013-316; S.L. 2013-414)
25. Exemption for service contract on uncharged items
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(62)
Effective Date: Jan. 1, 2014. (S.L. 2013-316)
26. Temporary cap on motor fuels tax rate
Tax Category: Excise Tax on Motor Fuels
Citation: G.S. 105-449.80(a)
Effective Date: July 1, 2012 through June 30, 2013 (S.L. 2012-142); Oct. 1, 2013 through June 30, 2015. (S.L. 2013-316)
Report Updates
11
A note on repealed items related to the privilege tax on amusements: Under S.L. 2013-316, the privilege taxes on admissions to live entertainment and motion picture shows were repealed, effective Jan. 1, 2014, and these admission charges became taxable under the sales & use tax at the State general rate. Several exemptions were kept under G.S. 105-164.13(60), but those listed in this section were not. Note that some of the performances given by the following may now be exempt under G.S. 105-164.13(60)c.
27. Charitable performances by uncompensated local talent
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(1)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by local talent exclusively, for the benefit of religious, charitable, benevolent or educational purposes, as long as no compensation is paid to the local talent. (S.L. 2013-316)
28. NC Symphony Society
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(2)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by the NC Symphony Society, Inc. (S.L. 2013-316)
29. Outdoor historical dramas
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by outdoor historical dramas, as specified in Article 19C of Chapter 143 of the General Statutes. (S.L. 2013-316)
30. First $1,000 of charitable amusements
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for the first $1,000 of gross receipts from amusements promoted and managed by civic organizations when the entire proceeds are used exclusively for civic and charitable purposes and not to defray the expenses of conducting the amusement. (S.L. 2013-316)
31. Amusements at nonprofit arts centers
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(7)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for dances, motion picture shows, and other amusements promoted and managed by a qualifying corporation that operates a center for the performing and visual arts if the dance or other amusement is held at the center. (S.L. 2013-316)
Report Updates
12
32. Amusements promoted by nonprofit arts organizations
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(7a)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for exhibitions, performances and entertainment promoted and managed by a nonprofit arts organization whose primary purpose is to create, produce, or support music, dance, literature or visual arts. (S.L. 2013-316)
33. Amusements by teen centers
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(8)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for persons exempt from income tax who are operating a teen center. (S.L. 2013-316)
34. Farm-related amusements
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(12)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for farm-related exhibitions, shows, attractions, or amusements offered on land used for bona fide farm purposes as defined in G.S. 153A-340. (S.L. 2013-316)
35. 1% tax on motion pictures
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-38.1(a)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a reduced tax rate from the general 3% rate for motion picture shows. (S.L. 2013-316)
36. Credit for low-income residential telephone service
Tax Category: Corporation Income Tax
Citation: G.S. 105-130.39
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit for a corporation that provided local telephone service to low-income residential consumers at reduced rates. The credit is equal to the difference between what the company actually charged these customers and the amount they would have charged at normal rates. (S.L. 2013-316)
37. Credit for S&L supervisory fees
Tax Category: Corporation Income Tax
Citation: G.S. 105-130.43
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit for savings and loan supervisory fees assessed by the Commissioner of Banks of the Department of Commerce. (S.L. 2013-316)
Report Updates
13
38. Personal exemption
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(a1)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision gave a taxpayer the same number of personal exemptions allowed under section 151 of the Code for the taxable year. The exemption amount was $2,000 if AGI was equal to or above the following limits by filing status: $100,000 if married filing jointly; $80,000 if head of household; $60,000 if single; $50,000 if married filing separately. If AGI was below these levels, the exemption amount was $2,500. (S.L. 2013-316)
39. Additional deduction for blind and elderly taxpayers
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(a2)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer that elected the standard deduction to deduct additional amounts for blind and elderly status. The amount was $600 for a married individual and $750 for a single individual who was not a surviving spouse. (S.L. 2013-316)
40. Private and government retirement plans
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income an amount up to $2,000 for private retirement plans or $4,000 for government retirement plans. For married filers filing jointly, the maximum amounts applied to each separately. (S.L. 2013-316)
Note: this does not impact the full deduction for North Carolina and federal government retirees who had 5 or more years of creditable service as of August 12, 1989.
41. Severance wages
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(11)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income severance wages from an employer. The amount of severance wages that could be deducted for the same termination was $35,000. (S.L. 2013-316)
42. Erroneous conviction and imprisonment
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(14)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid to the taxpayer under G.S. 148-84 for erroneous conviction and imprisonment. (S.L. 2013-316)
43. Interest earned on certain trusts
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(15)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the interest earned on a Trust established by two or more manufacturers to pay for damages. (S.L. 2013-316)
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44. Hurricane Floyd Reserve Fund
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(16)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid from the Hurricane Floyd Reserve Fund. (S.L. 2013-316)
45. Disaster Relief Reserve payments
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(18)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid for hurricane relief from the Disaster Relief Fund, not to include amounts paid for goods and services provided. (S.L. 2013-316)
46. Sale of a manufactured home community to leaseholders
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(19)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income 5% of the gross purchase price of a qualified sale of a manufactured home community. (S.L. 2013-316)
47. Business income deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(22)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income up to $50,000 of net business income. For married filers filing jointly, the maximum amounts applied to each separately. (S.L. 2013-316)
48. Parental Savings Trust Fund deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount contributed to an account in the Parental Savings Trust Fund of the State Education Assistance Authority. The maximum deduction was $2,500 ($5,000 for joint filers). (S.L. 2013-316)
49. Volunteer fire and rescue squad deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income $250 if the taxpayer was an eligible volunteer firefighter or an eligible volunteer rescue squad worker. (S.L. 2013-316)
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50. Educator expenses deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(9)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an eligible educator to deduct from income up to $250 paid or incurred in connection with certain education-related purchases, to the extent that a deduction for educator expenses had not been taken in determining adjusted gross income. (S.L. 2013-316)
51. Net economic losses incurred prior to January 1, 1989
Tax Category: Individual Income Tax
Citation: G.S. 105-134.7(a)(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income net economic losses in the 5 years preceding Tax Year 1989, arising from business transactions, business capital, or business property. (S.L. 2013-316)
52. Construction of dwellings for handicapped persons
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.22 & G.S. 105-151.1
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an owner of multifamily rental units located in this State a credit equal to $550 for each dwelling unit constructed that conforms to Volume I-C of the NC Building Code. (S.L. 2013-316)
53. Credit for child care and certain employment-related expenses
Tax Category: Individual Income Tax
Citation: G.S. 105-151.11
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer a credit in proportion to the eligible federal credit for a percentage of employment-related expenses under Section 21 of the Code. The amount of expenses for which a credit was claimed many not exceed $3,000 for one qualifying household member or $6,000 for multiple qualifying members. (S.L. 2013-316)
54. Credit for certain real property donations
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.34 & G.S. 105-151.12
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of donations of real property for public beach access, public access to water or trails, fish and wildlife conservation, or other similar land conservation purposes. The credit could not exceed $500,000 ($250,000 for single individual filers). (S.L. 2013-316)
55. Credit for conservation tillage equipment
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.36 & G.S. 105-151.13
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of the cost of conservation tillage equipment for use in a farming business, including tree farming. The credit could not exceed $2,500. (S.L. 2013-316)
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56. Credit for gleaned crops
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.37 & G.S. 105-151.14
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 10% of the market price of unharvested crops donated by the grower to a qualified organization. (S.L. 2013-316)
57. Credit for the disabled
Tax Category: Individual Income Tax
Citation: G.S. 105-151.18
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit equal to ⅓ of the federal credit to a taxpayer who (1) was retired on disability, (2) at the time of retirement was totally or permanently disabled, and (3) claimed the federal credit for the elderly and disabled. A credit was also available for a disabled dependent. (S.L. 2013-316)
58. Credit for property taxes paid on farm machinery
Tax Category: Individual Income Tax
Citation: G.S. 105-151.21
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit to farmers and individual shareholders of S Corporations engaged in farming equal to the amount of property taxes paid on farm machinery, or attachments and repair parts for farm machinery. The credit could not exceed $1,000. (S.L. 2013-316)
59. Credit for construction of poultry composting facility
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.44 & G.S. 105-151.25
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of the installation, materials, and equipment costs of construction paid during the year. This credit may not exceed $1,000 for any single installation. (S.L. 2013-316)
60. Credit for charitable contributions by nonitemizers
Tax Category: Individual Income Tax
Citation: G.S. 105-151.26
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit to a taxpayer who elected the standard deduction on their Federal income tax equal to 7% of the taxpayer’s excess charitable contributions. Excess contributions were defined as those over 2% of the taxpayer’s adjusted gross income. (S.L. 2013-316)
61. Education credit for children with disabilities
Tax Category: Individual Income Tax
Citation: G.S. 105-151.33
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit up to $3,000 per semester for each eligible dependent child who was a resident of this State and who was in grades K-12 in a nonpublic school or a public school that charges tuition. An eligible child must have received special education or related services on a daily basis; for initial eligibility, he or she must have been Report Updates
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enrolled in a public school for the two preceding semesters or been a preschool child receiving special education services through a public school. (S.L. 2013-316)
Note: This credit was effective beginning in tax year 2011 for semesters beginning on or after July 1, 2011. This credit was effectively replaced by a State-funded grant – see S.L. 2013-364.
62. Political parties financing fund designation
Tax Category: Individual Income Tax
Citation: G.S. 105-159.1
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2013.
Description: This provision allowed a taxpayer whose income tax liability was $3 or more to designate $3 of the tax to the North Carolina Political Parties Financing Fund for the use of the political party of the taxpayer’s choice. Couples who filed a joint return could designate $3 each. (S.L. 2013-381)
63. Public campaign fund designation
Tax Category: Individual Income Tax
Citation: G.S. 105-159.2
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2013.
Description: This provision allowed a taxpayer whose income tax liability was $3 or more to designate $3 of the tax to the North Carolina Public Campaign Fund for voter materials related to the election of N.C. Supreme Court judges. Couples who filed a joint return could designate $3 each. (S.L. 2013-360)
64. Horse or mule sold to a farmer
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(1)c
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted the sale of a horse or mule for agricultural purposes. (S.L. 2013-316)
65. Chiropractors’ nutritional supplements
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(13c)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted nutrional supplements sold by a chiropractric physician at a chiropractic office to a patient as part of the patient’s plan of treatment. (S.L. 2013-316)
66. Food and prepared meals sold by institutions of higher education (public and private)
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(27)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted sales of food served to students in dining rooms regularly operated by State or private educational institutions or student organizations thereof (K-12 schools are exempt under a separate provision). (S.L. 2013-316)
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67. Bread sold at a bakery thrift store
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(27a)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of bread, rolls, and buns sold at a bakery thrift store. (S.L. 2013-316)
68. Sales of newspapers
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(28)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted sales of newspapers by street vendors, by vending machines and by subscription for door-to-door delivery. (S.L. 2013-316)
Note: As of January 1, 2014, sales of newspapers through vending machines would be taxed on 50% of the price, due to G.S. 105-164.13(50).
69. Sales of electricity to commercial laundries
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(1f)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision gave a preferential tax rate of 2.83% for sales of electricity to commercial laundries or dry-cleaning establishments. (S.L. 2013-316)
70. Sales of electricity to commercial businesses and residences
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(4a)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision gave a preferential tax rate of 3% for sales of electricity, other than sales of electricity to entities that were given a lower tax rate. (S.L. 2013-316)
71. Sales of manufactured homes
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(1a)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision gave a preferential tax rate of 2% on sales of manufactured homes, with a maximum of $300. (S.L. 2013-316)
72. Sales of modular homes and offices
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(8)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision gave a preferential tax rate of 2.5% on sales of modular homes. (S.L. 2013-316)
73. Naturas gas received by a gas city
Tax Category: Piped Natural Gas Tax
Citation: G.S. 105-187.41(c)(1)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted tax on piped natural gas received by a gas city for consumption or delivered by to a sales or transportation customer of that city. (S.L. 2013-316) Report Updates
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74. Sales & use tax holiday
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13C
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of various items, including certain clothing, computers, and school supplies during the first weekend of August. (S.L. 2013-316)
75. Energy Star sales tax holiday
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13D
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of certain Energy Star products during the first weekend of November. (S.L. 2013-316)
76. Municipalities that sell electric power
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.21A
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision allowed a municipality that paid sales tax on electricity to deduct 3% of the difference between its gross receipts from sales of electricity for the preceding reporting period and the amount paid for purchased power and related services during that period. (S.L. 2013-316)
Privilege Taxes
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Privilege taxes are imposed for the privilege of carrying on business or doing a remunerative act within the State. Privilege taxes on corporations are discussed under the “franchise tax” article.
There is no standard tax base or tax rate for privilege taxes that covers all businesses or activities. However, in order to determine preferential tax rates and exclusions, the tax rate is assumed to be 3% when the tax base is gross receipts and $50 when there is a flat licensing fee.
In Fiscal Year 2012-13, approximately $46.8 million was collected from this tax.
The privilege taxes on admissions to live events and motion pictures are repealed effective Jan. 1, 2014. On that date, admission charges become taxable under the sales tax at the general State rate of 4.75%. Several exemptions that were retained now appear in the Sales & Use section of this report.
1. Professionals over 75 Years Old
Citation: G.S. 105-41(b)(1)
Description: Exemption from license fee for attorneys or other professionals who are over 75 years old.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: Relevant privilege tax collections for FY12-13 and share of affected group in workforce
2. Individuals Practicing Art of Healing
Citation: G.S. 105-41(b)(2)
Description: Exemption from license fee for individuals who practice the art of healing for a fee, if the person is an adherent of an established church or religious organization and confines the healing practice to prayer or spiritual means.
Enacting Legislation: S.L. 1957-1064
Estimate (in millions): less than $0.1
Data Source: Derived from Department of Revenue list of licenses
3. Blind Individuals
Citation: G.S. 105-41(b)(3)
Description: Exemption from license fee for blind individuals.
Enacting Legislation: S.L. 1998-95 - effective July 1, 1999
Privilege Taxes
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Estimate (in millions): less than $0.1
Data Source: Relevant privilege tax collections for FY12-13 and share of affected group in workforce
4. Savings Banks and Savings & Loan Associations
Citation: G.S. 105-102.3
Description: Exemption from bank privilege tax for savings institutions created under General Statute Chapter 54B, 54C or Home Owners' Loan Act of 1933.
Enacting Legislation: S.L. 1985-985 - effective July 11, 1986
Estimate (in millions): FY13-14 ........ $0.2 FY14-15 ....... $0.2
Data Source: North Carolina Commissioner on Banks; Federal Depositors' Insurance Corporation
Note: The privilege tax on banks is $30 for each $1,000,000 or fractional part thereof of total assets.
5. Credit for Newsprint Recycling Program
Citation: G.S. 105-102.6(c)
Description: A publisher who has developed and operates or contracts for the operation of a newspaper or magazine recycling program shall receive 1 ton of credit toward its recycled content goall for each ton of recycling.
Enacting Legislation: S.L. 1995-459; S.L. 1999-346 added magazine recycling and increased the credit from ½ ton to 1 ton
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... $0.1
Data Source: Department of Revenue tax data
6. Unavailability of Recycled Newsprint
Citation: G.S. 105-102.6(e)
Description: Exemption from tax on unrecycled paper if recycled newsprint is unavailable due to (1) high price, (2) comparable quality or (3) time constraints.
Enacting Legislation: S.L. 1991-539 - effective Oct. 1, 1991
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Tobacco Tax
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A cigarette tax is levied on the sale or possession for sale in this State, by a distributor, of all cigarettes. Other tobacco products are taxed when a wholesale dealer or retail dealer first acquires or otherwise handles the products subject to the tax.
As of Sept. 1, 2009, the tax rate on a 20-pack of cigarettes is 45¢ and the tax rate on other tobacco products is 12.8% of the cost price.
During Fiscal Year 2012-13, approximately $281.1 million was collected from this tax.
1. Discount for Timely Reports -- Cigarettes
Citation: G.S. 105-113.21(a1)
Description: A distributor who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%. The current statute states that "(t)his discount covers expenses incurred in preparing the records and reports required by this Part, and the expense of furnishing a bond."
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003 (S.L. 1969-1075).
Estimate (in millions): FY13-14 ........ $4.8 FY14-15 ....... $4.7
Data Source: Department of Revenue tax data
Note: This provision was effective beginning August 1, 2004. There was a 4% discount prior to August 1, 2003
2. Refund for Unsalable Cigarettes
Citation: G.S. 105-113.21(b)
Description: Refund for unsalable cigarettes upon which the tax has been paid.
Enacting Legislation: S.L. 1993-442
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... $0.1
Data Source: Department of Revenue tax data
Tobacco Tax
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3. Sample Tobacco Products
Citation: G.S. 105-113.35(a)(3)
Description: The tax does not apply to a sample tobacco product distributed without charge.
Enacting Legislation: S.L. 1991-689 – effective Jan. 1, 1992 (this act created the tax on other tobacco products)
Estimate (in millions): Unavailable
Data Source: Department of Revenue tax data
4. Discount for Timely Reports -- Other Tobacco Products
Citation: G.S. 105-113.39(a)
Description: A wholesale dealer or retail dealer who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%.
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003.
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.6
Data Source: Department of Revenue tax data
5. Refund for Unsalable Tobacco Products
Citation: G.S. 105-113.39(b)
Description: A wholesale dealer or retail dealer in possession of stale or otherwise unsalable tobacco products upon which the tax has been paid may return the tobacco products to the manufacturer and apply to the Secretary for refund of the tax.
Enacting Legislation: S.L. 2005-406 - effective Sept. 1, 2005
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Alcoholic Beverage License and Excise Taxes
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Excise taxes are levied on beer and wine based on volume; excise taxes are levied on liquor sold by ABC stores based on price. These excise taxes are in addition to sales & use tax, as well as other charges on sales of liquor.
As of Sept. 1, 2009, the tax on beer is 61.71¢ per gallon; the tax on unfortified wine is 26.34¢ per liter; the tax on fortified wine is 29.34¢ per liter; the tax on liquor is 30% of the sum of the distiller's price, the State ABC warehouse freight and bailment charges, and a markup for local ABC boards.
During Fiscal Year 2012-13, $331.2 million was collected from this tax. Of this amount, $32.6 million was distributed to local governments.
1. Beer and Wine Destroyed by a Major Disaster
Citation: G.S. 105- 113.81(a)
Description: Excise taxes are not required to be paid on malt beverages or wine rendered unsalable by a major disaster.
Enacting Legislation: S.L. 1967-759 - effective Jan. 1, 1968; this provision was enacted as G.S. 18.81(i)
Estimate (in millions): Unavailable
2. Beer and Wine for Oceangoing Vessels
Citation: G.S. 105- 113.81(b)
Description: Excise taxes are not required to be paid on malt beverages or wine sold and delivered for use on oceangoing vessels. Sales made to officers, agents, crewmen, or passengers for their personal use are not exempt.
Enacting Legislation: S.L. 1963-992
Estimate (in millions): Unavailable
3. Brewery and Winery Tastings
Citation: G.S. 105- 113.81(e)
Description: Resident breweries and wineries are not required to remit excise taxes on malt beverages and wine given free of charge to customers, visitors, and employees on the manufacturer's licensed premises for consumption on those premises.
Enacting Legislation: S.L. 1985-114 - effective April 23, 1985
Estimate (in millions): Unavailable
Alcoholic Beverage License and Excise Taxes
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4. Discount for Timely Reports
Citation: G.S. 105-113.85
Description: A wholesaler or importer who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%. The current statute states that "(t)his discount covers losses due to spoilage and breakage, expenses incurred in preparing the records and reports required by this Article, and the expense of furnishing a bond."
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003 (S.L. 1969-1239)
Estimate (in millions): FY13-14 ........ $3.1 FY14-15 ....... $3.2
Data Source: Department of Revenue tax data
5. Sacramental Wine
Citation: G.S. 105-113.87(a)
Description: Refund for wine used for sacramental purposes.
Enacting Legislation: S.L. 1945-708 - this provision was enacted as G.S. 18-88.1
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Franchise Tax
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The franchise tax is composed of several categories: (1) a gross receipts tax on water and sewerage companies, (2) a tax on mutual burial associations based on membership, and (3) a tax on domestic and foreign corporations and holding companies. All the tax expenditures in this section are derived from the third type, which is also referred to as the “general business franchise tax.”
The general business franchise tax is a privilege tax on corporations operating in North Carolina. The tax is currently $1.50 for every $1,000 of the largest of the following three measures:
1. the total amount of capital stock, surplus and undivided profits
2. the net accounting value of real and tangible property in the State
3. 55% of the appraised value of real and tangible property in the State
For corporations doing business both in and outside North Carolina, the share of capital stock apportioned to North Carolina is calculated by the same method used for the corporation income tax: the average of the corporation’s shares of property, payroll and sales, with the sales factor double-weighted.
The minimum franchise tax is $35. For tax year 2008, 49% of C-corporations and 53% of S-corporations paid the minimum amount.
In Fiscal Year 2012-13, North Carolina collected approximately $518.8 million in general business franchise taxes.
1. Double-Weighting of Sales Factor in Apportionment of Capital Stock
Citation: G.S. 105-122(c1)(1)
Description: The capital stock, surplus and undivided profits of a corporation are apportioned using the formula in G.S. 105-130.4, which doubles the relative importance of the company's sales in the State.
Enacting Legislation: S.L. 1988-994 - effective for tax years beginning on or after Jan. 1, 1989
Estimate (in millions): FY13-14 ........ $16.2 FY14-15 ....... $16.8
Data Source: Department of Revenue tax data
Note: There are several types of companies that do not use the double-weighted sales factor to calculate their apportionment percentage. These include building or construction contractors, several types of financial companies, motor carriers, public utilities, railroad companies, and corporations that receive more than 50% of their income from intangible property.
Franchise Tax
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2. Charitable Nonprofits
Citation: G.S. 105-125(a)(1)
Description: Charitable, religious, fraternal, benevolent, scientific or educational nonprofit.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $122.7 FY14-15 ....... $128.8
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
3. Local Mutual Nonprofits
Citation: G.S. 105-125(a)(3)
Description: Mutual ditch or irrigation association, mutual or cooperative telephone association, mutual canning association, cooperative breeding association or similar corporation of a purely local character deriving receipts solely from assessments, dues, or fees collected from members for the sole purpose of meeting expenses.
Enacting Legislation: S.L. 1955-1313
Estimate (in millions): FY13-14 ........ $10.0 FY14-15 ....... $10.5
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
4. Cooperative Marketing Associations
Citation: G.S. 105-125(a)(4)
Description: Cooperative marketing associations that operate solely for the purpose of marketing the products of members or other farmers and returns proceeds of sales to members and farmers, less operating costs.
Enacting Legislation: S.L. 1955-1313
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.7
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
5. Production Credit Association
Citation: G.S. 105-125(a)(5)
Description: Nonprofit production credit association organized under federal Farm Credit Act of 1933.
Enacting Legislation: S.L. 1963-601
Estimate (in millions): FY13-14 ........ $0.9 FY14-15 ....... $0.9
Data Source: Based on capital stock and retained earnings of the three farm credit associations in North Carolina
Franchise Tax
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6. Nonprofit Clubs
Citation: G.S. 105-125(a)(6)
Description: Clubs organized and operated exclusively for pleasure, recreation, or other nonprofit purposes, a civic league operated solely for the promotion of social welfare, a business league, or a board of trade.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $5.2 FY14-15 ....... $5.5
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
7. Chambers of Commerce
Citation: G.S. 105-125(a)(7)
Description: Chamber of commerce or merchants' association, not organized for profit.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $2.9 FY14-15 ....... $3.0
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
8. Homeowners' Associations
Citation: G.S. 105-125(a)(8)
Description: Condominium association, homeowners' association, or cooperative housing corporation not organized for profit.
Enacting Legislation: S.L. 1975-591 - effective for taxable years beginning on or after Jan. 1, 1975
Estimate (in millions): FY13-14 ........ $2.1 FY14-15 ....... $2.2
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS).
9. Miscellaneous Nonprofits
Citation: G.S. 105-125(a)(9)
Description: Other organizations exempt from federal income tax under the Code.
Enacting Legislation: S.L. 1983-713 - effective for taxable years beginning on or after Jan. 1, 1983
Estimate (in millions): FY13-14 ........ $45.4 FY14-15 ....... $48.6
Data Source: Estimate for credit unions from NC Deptment of Commerce, Credit Union Division Annual Report (2012).
Franchise Tax
29
10. Real Estate Mortgage Investment Conduits
Citation: G.S. 105-125(a)
Description: An entity that qualifies as a real estate mortgage investment conduit, as defined in section 860D of the Code, is exempt from franchise taxes.
Enacting Legislation: S.L. 1993-494 - effective for taxable years beginning on or after Jan. 1, 1993
Estimate (in millions): Unavailable
11. Deduction from Capital Stock for Legal Liabilities
Citation: G.S. 105-122(b)(1)
Description: Deduction from capital stock base for definite and accrued legal liabilities.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
12. Deduction from Capital Stock for Billings in Excess of Costs
Citation: G.S. 105-122(b)(1a)
Description: Effective January 1, 2010 (Tax Year 2009 returns): Deduction for billings in excess of costs that are considered a deferred liability under the percentage of completion method of revenue recognition.
Enacting Legislation: S.L. 2009-422 - effective for taxable years beginning on or after Jan. 1, 2010
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax records
13. Deduction from Capital Stock for Taxes, Dividends, and Depreciation
Citation: G.S. 105-122(b)(2)
Description: Deduction from capital stock base for taxes accrued, dividends declared, and reserves for depreciation of tangible assets and for amortization of intangible assets as permitted for income tax purposes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
Franchise Tax
30
14. Deduction from Capital Stock for Deferred Tax Assets
Citation: G.S. 105-122(b)(3)
Description: When including deferred tax liabilities, a corporation may reduce the amount included in its base by netting against that amount deferred tax assets. The reduction may not decrease deferred tax liabilities below zero.
Enacting Legislation: S.L. 2006-95 - effective for taxable years beginning on or after Jan. 1, 2007
Estimate (in millions): Unavailable
15. Deduction from Capital Stock for Investments in Pollution Abatement Equipment
Citation: G.S. 105-122(b)(4)
Description: Deduction for cost of air-cleaning device or sewage or waste treatment plant and pollution abatement equipment.
Enacting Legislation: S.L. 1955-1100; S.L. 1967-892 added air-cleaning device and air pollution abatement equipment
Estimate (in millions): Unavailable
16. Deduction from Capital Stock for Investments in Hazardous Waste Abatement
Citation: G.S. 105-122(b)(5)
Description: Deduction for cost of purchasing equipment or constructing facilities for the purpose of recycling or reducing hazardous wastes.
Enacting Legislation: S.L. 1975-764 - effective for taxable years beginning on or after Jan. 1, 1976
Estimate (in millions): Unavailable
17. Deduction from Capital Stock for Facilities Used for Residential Sewer Services
Citation: G.S. 105-122(b)(6)
Description: Deduction for the cost of constructing facilities used to provide sewer services to residential and outlying areas.
Enacting Legislation: S.L. 1967-892
Estimate (in millions): Unavailable
18. International Banking Facility Capital Stock
Citation: G.S. 105-122(b)(8)
Description: The capital base of an international banking facility may be reduced by the excess of the amount of all assets employed outside the U.S. over liabilities owed to foreign persons.
Enacting Legislation: S.L. 1981-855
Estimate (in millions): Unavailable
Franchise Tax
31
19. Deduction from Property Investment for Expenses Related to Purchases of Real Estate
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments of reserves for depreciation and any indebtedness incurred by virtue of the purchase of any real estate and any improvements.
Enacting Legislation: S.L. 1947-501
Estimate (in millions): Unavailable
20. Deduction from Property Investment for Waste Abatement Investments
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments of cost of air-cleaning device or sewerage or waste treatment plant.
Enacting Legislation: S.L. 1955-1100; S.L. 1967-892 added air-cleaning device and air pollution abatement equipment
Estimate (in millions): Unavailable
21. Deduction from Property Investment for Investments in Rural Sewer Services
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments for the cost of constructing facilities built to provide sewer service to residential and outlying areas.
Enacting Legislation: S.L. 1967-892
Estimate (in millions): Unavailable
22. Real Estate Investment Trusts and Regulated Investment Corporations
Citation: G.S. 105-125(b)
Description: A regulated investment company or a non-captive REIT may deduct the aggregate market value of its investments in the stocks, bonds, debentures, or other securities or evidences of debt of other corporations, partnerships, individuals, municipalities, governmental agencies, or governments.
Enacting Legislation: S.L. 1951-937 - for regulated investment companies; S.L. 1971-820 - added REITs
Estimate (in millions): Unavailable
Franchise Tax
32
23. Tax Credit for LLCs Subject to Franchise Tax
Citation: G.S. 105-122.1
Description: Limited liability companies that are subject to the franchise tax are allowed a credit for the difference between the annual reporting fee for LLCs ($200) and the annual reporting fee for other corporations ($18 for electronic copy, $25 for paper copy). The amount of the credit cannot exceed the LLC's franchise tax liability for the year.
Enacting Legislation: S.L. 2006-66 – effective Jan. 1, 2007 (tax year 2006 returns). Prior to this, all LLCs were exempt from the franchise tax, but paid the higher reporting fee.
Estimate (in millions): FY13-14 ........ $0.3 FY14-15 ....... $0.4
Data Source: Department of Revenue C-corporation and S-corporation databases
24. Piped Natural Gas Credit
Citation: G.S. 105-122(d1)
Description: Tax credit of one-half amount of piped natural gas tax. The credit allowed may not exceed the tax amount reduced by all credits.
Enacting Legislation: S.L. 1998-22 – effective July 1, 1999.
Estimate (in millions): FY13-14 ........ $3.7 FY14-15 ....... $0.9
Data Source: Department of Revenue C-corporation and S-corporation databases
Note: The piped natural gas tax was repealed effective January 1, 2014.
25. Cap for Holding Companies
Citation: G.S. 105-120.2(b)(1)
Description: Maximum tax of $75,000 for holding companies. A holding company is any corporation which receives during its taxable year more than 80% of its gross income from corporations in which it owns directly or indirectly more than 50% of the outstanding voting stock.
Enacting Legislation: S.L. 1975-130 - effective Jan. 1, 1976
Estimate (in millions): FY13-14 ........ $132.0 FY14-15 ....... $135.0
Data Source: Department of Revenue C-corporation and S-corporation databases
Note: Approximately 74 companies were subject to this cap in tax year 2011 (2010 returns).
Corporation Income Tax
33
The corporation income tax is a tax on the net income of every domestic C corporation and of every foreign C corporation doing business in North Carolina.
Exclusions and exemptions under federal law are generally passed through to North Carolina in order to determine taxable income. There are, however, a number of additions to federal taxable income; significant among these additions are (1) taxes paid on net income, (2) interest from obligations of other states and their political subdivisions, (3) net operating loss carryforwards, (4) domestic production activities deduction, (5) expenses related to non-taxed income, and (6) royalty payments paid to related entities.
A dividends-received deduction is considered necessary for determining the corporate income tax base, as it avoids multiple layers of taxation on dividends that are passed between related corporate entities. The state dividends-received deduction conforms to the federal provision, with the exception that expenses related to the exempt dividends must be added to North Carolina taxable income.
For certain nonprofit organizations, such as charities, exemption from the corporate income tax is not considered a tax expenditure because promoting public welfare is central to their operations, and these entities are still taxed on their unrelated business activities. Also, certain nonprofit cooperative business organizations, such as trade associations, are excluded because their profits are distributed to members. These exemptions from the tax base are similar to those used by the Joint Committee on Taxation in preparing their list of federal tax expenditures.
The following chart shows the tax rates in effect during the relevant period covered by this report:
Taxable year beginning in
Tax Rate 2011 - 2013 6.9%
2014
6.0% 2015 5.0%
G.S. 105-130.5(a)(10) requires corporations to add the amount of most credits taken to their taxable income. The estimates of tax credits in this section were adjusted for this provision.
In Fiscal Year 2012-13, North Carolina collected approximately $1.3 billion in corporate income taxes.
Corporation Income Tax
34
1. Double-Weighting of Sales Factor in Apportionment Formula
Citation: G.S. 105-130.4
Description: For most corporations, business income is apportioned to North Carolina based on the share of (1) payroll, (2) property, & (3) sales in North Carolina. However, the sales factor is double-weighted.
Enacting Legislation: S.L. 1988-994 - effective for tax years beginning on or after January 1, 1989
Estimate (in millions): FY13-14 ........ $55.3 FY14-15 ....... $49.9
Data Source: Department of Revenue tax data
Note: There are several types of companies that do not use the double-weighted sales factor to calculate their apportionment percentage. These include building or construction contractors, several types of financial companies, motor carriers, public utilities, railroad companies, and corporations that receive more than 50% of their income from intangible property.
2. Sales-Only Apportionment for Capital-Intensive Corporations
Citation: G.S. 105-130.4(s1)
Description: All apportionable income of a qualified capital intensive corporation shall be apportioned by multiplying the income by the sales factor only. A capital-intensive corporation is one where the property factor exceeds 75% of the combined factors, with the sales factor double-weighted. The corporation must also invest at least $1 billion over 9 years in constructing a facility. The corporation is not eligible for tax credits under Article 3J [G.S. 105-129.83(m)].
Enacting Legislation: S.L. 2009-54 - effective for taxable years beginning on or after January 1, 2010
Estimate (in millions): FY13-14 ........ $24.6 FY14-15 ....... $20.8
Data Source: Department of Revenue tax data
3. Fraternal Beneficiary Societies
Citation: G.S. 105-130.11(a)(1)
Description: Exemption for fraternal beneficiary societies, orders or associations (a) operating under the lodge system or providing benefits to members of a lodge system and (b) providing for the payment of life, sick, accident, or other benefits of the organization or their dependents.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010," Statistics on Income, IRS
Note: Based on data for IRC 501(c)(8) organizations Corporation Income Tax
35
4. Certain Cooperative Companies
Citation: G.S. 105-130.11(a)(2)
Description: Exemption for nonprofit cooperative banks without capital stock and electric and telephone membership corporations organized under Chapter 117 of the General Statutes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $2.4 FY14-15 ....... $2.3
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
Note: Based on data for IRC 501(c)(14) organizations
5. Nonprofit Clubs
Citation: G.S. 105-130.11(a)(6)
Description: Exemption for nonprofit clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $0.5 FY14-15 ....... $0.6
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
Note: Based on data for IRC 501(c)(7) organizations
6. Local Mutual Nonprofits
Citation: G.S. 105-130.11(a)(7)
Description: Exemption for farmers' or other mutual hail, cyclone, or fire insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations of a purely local nature.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: Data on county farm mutual insurance companies, NC Department of Insurance; Department of Revenue tax data
Corporation Income Tax
36
7. Insurance Companies Taxed on Gross Premiums
Citation: G.S. 105-130.11(a)(11)
Description: Exemption for insurance companies paying the tax on gross premiums as specified in G.S. 105-228.5.
Estimate (in millions): FY13-14 ........ $0.0 FY14-15 ....... $0.0
Data Source: IRS Statistics of Income; Department of Revenue tax data
Note: The estimate is the amount of income tax that is estimated to be collected in excess of the amount of collections under the insurance gross premiums tax.
8. Homeowners' Associations
Citation: G.S. 105-130.11(a)(11)
Description: Exemption for nonprofit condominium associations, homeowners' associations, or cooperative housing corporation, although they are subject to tax on any unrelated business income.
Enacting Legislation: S.L. 1975-591 - effective for taxable years beginning on or after Jan. 1, 1975
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.6
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
9. Nonprofit Unrelated Business Income from Research Activities
Citation: G.S. 105-130.11(b)
Description: Entities that are exempt in G.S. 105-130.11(a) are taxable on their unrelated business income, except if their net income is derived from certain research activities.
Enacting Legislation: S.L. 1963-1169 - effective for taxable years beginning on or after Jan. 1, 1963
Estimate (in millions): Unavailable
10. N.C. & Nonprofit Educational Institution Obligation Interest
Citation: G.S. 105-130.5(b)(1a)
Description: Deductions for interest on the obligations of this State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State, or a nonprofit educational institution.
Enacting Legislation: S.L. 1997-439 - effective for taxable years beginning on or after January 1, 1997. However, this was not a substantive change since interest has been exempt from income taxation under other long-standing statutes, e.g. G.S. 142.12.
Estimate (in millions): FY13-14 ........ $1.0 FY14-15 ....... $1.0
Data Source: IRS Statistics of Income; Department of Revenue tax data Corporation Income Tax
37
11. Dividends from Foreign Sources
Citation: G.S. 105-130.5(b)(3a)
Description: Deduction for dividends treated as received from sources outside the United States as determined under Section 862 of the Code, net of related expenses, to the extent included in federal taxable income.
Enacting Legislation: S.L. 2001-327
Estimate (in millions): FY13-14 ........ $23.1 FY14-15 ....... $22.6
Data Source: Joint Committee on Taxation
Note: The estimate is based on the expense addback that is foregone due to U.S. corporations delaying repatriation of dividends from controlled foreign subsidiaries.
12. Subpart F and Section 78 Gross-Up Dividends
Citation: G.S. 105-130.5(b)(3b)
Description: Deduction for any amount included in federal taxable income under section 78 or section 951 of the Code, net of related expenses.
Enacting Legislation: S.L. 2001-327
Estimate (in millions): Unavailable
13. Net Economic Loss Carryforward
Citation: G.S. 105-130.5(b)(4)
Description: Deduction for net economic losses in any or all of the 15 preceding income years, pursuant to the provisions of G.S. 105-130.8.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $186.3 FY14-15 ....... $143.7
Data Source: Department of Revenue tax data
14. Depreciation of Certain Emergency Facilities
Citation: G.S. 105-130.5(b)(7)
Description: Deduction for depreciation of emergency facilities acquired prior to Jan 1, 1955.
Enacting Legislation: S.L. 1957-1340
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
38
15. Net Capital Losses Not Deductible from Federal Taxable Income
Citation: G.S. 105-130.5(b)(8)
Description: Deduction for the amount of losses realized on the sale or disposition of assets not allowed under section 1211(a) of the Code. (For federal taxes, certain capital losses can only be used to offset capital gains; however, they can be carried back 3 years and forward 5 years.)
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
16. Shareholders of a Regulated Investment Company
Citation: G.S. 105-130.5(b)(9)
Description: Deduction of the portion of undistributed capital gains of a regulated investment company for which a shareholder in the company takes a federal credit or deduction under Section 852 of the Code.
Enacting Legislation: S.L. 1971-820 - effective for taxable years beginning on or after Jan. 1, 1971
Estimate (in millions): Unavailable
17. Reforestation and Cultivation of Trees
Citation: G.S. 105-130.5(b)(12)
Description: Deduction for reasonable expenses, in excess of deductions allowed under the Code, paid for reforestation and cultivation of commercially grown trees. (IRS Code Sec. 194 allows a deduction up to $10,000 for qualified reforestation expenses and 7-year amortization for the remaining amounts; Christmas trees do not qualify.)
Enacting Legislation: S.L. 1979-801 - effective for taxable years beginning on or after Jan. 1, 1979
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
18. Income from International Banking Facility
Citation: G.S. 105-130.5(b)(13)
Description: Deduction of the eligible income of an international banking facility to the extent included in determining federal taxable income. (An international banking facility allows depository institutions in the U.S. to offer deposit and loan services to foreign residents and institutions.)
Enacting Legislation: S.L. 1981-855
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
39
19. Basis Adjustment for Federal Tax Credit
Citation: G.S. 105-130.5(b)(14)
Description: Deduction for the amount that the basis of a depreciable asset is reduced due to a Federal tax credit or because of a grant allowed under section 1603 of the American Recovery and Reinvestment Tax Act of 2009.
Enacting Legislation: S.L. 1983-61 - effective for taxable years beginning on or after Jan. 1, 1983
Estimate (in millions): Unavailable
20. Marketing Assessments on Tobacco
Citation: G.S. 105-130.5(b)(15)
Description: Deduction for the amount paid, pursuant to 7 U.S.C. 1445-2, as marketing assessments on tobacco grown by a corporation in North Carolina.
Enacting Legislation: S.L. 1985-720 - effective for taxable years on or after Jan. 1, 1985
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue tax data
Note: The federal provisions on which the marketing assessments were based have been repealed in the American Jobs Creation Act of 2004 for 2005 and subsequent crops.
21. Natural Gas Expansion Surcharges
Citation: G.S. 105-130.5(b)(16)
Description: Deduction for the amount of natural gas expansion surcharges collected by a natural gas local distribution company.
Enacting Legislation: S.L. 1991-598 - effective July 8, 1991
Estimate (in millions): less than $0.1
Data Source: North Carolina Utilities Commission; Department of Revenue tax data
22. 911 Charges
Citation: G.S. 105-130.5(b)(17)
Description: To the extent included in federal taxable income, 911 charges imposed under G.S. 62A-43 and remitted to the 911 Fund under that section.
Enacting Legislation: S.L. 1998-158, as amended by S.L. 1999-337 - effective Sept. 25, 1998
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
40
23. Earnings of Certain Trusts
Citation: G.S. 105-130.5(b)(18)
Description: Deduction of earnings on a trust for settlement of an agreement by two or more manufacturers with the State for potential claims against the manufacturers.
Enacting Legislation: S.L. 1999-333 - effective for taxable years beginning on or after Jan. 1, 1999
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Note: This deduction was created for the National Tobacco Settlement Fund, which was established to distribute funds from tobacco companies to tobacco growers and allotment holders. The interest, investment earnings and gain of a qualified settlement fund are generally included in taxable income. The tobacco companies agreed to contribute to the Fund each year through 2010, but this was superseded by the 2004 Tobacco Buyout.
24. Income from Hurricane Floyd Reserve Fund
Citation: G.S. 105-130.5(b)(19)
Description: Deduction for the amount paid to taxpayer from the Hurricane Floyd Reserve Fund.
Enacting Legislation: S.L. 1999-463 - effective for taxable years beginning on or after Jan. 1, 1999
Estimate (in millions): less than $0.1
25. Disaster Relief Reserve Payments
Citation: G.S. 105-130.5(b)(22)
Description: Deduction for amounts paid to taxpayers for hurricane relief from the Disaster Relief Reserve Fund, not to include amounts paid for goods and services provided.
Enacting Legislation: S.L. 2005-1 - effective for taxable years beginning on or after Jan. 1, 2004
Estimate (in millions): Unavailable
Corporation Income Tax
41
26. Dividends from Captive REIT
Citation: G.S. 105-130.5(b)(23)
Description: Deduction for a dividend received from a captive REIT, as defined in G.S. 105-130.12.
Enacting Legislation: S.L. 2007-323 - effective for taxable years beginning on or after Jan. 1, 2007
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by G.S. 105-130.5(a)(19). A captive REIT must add to its taxable income any dividends paid to shareholders. Therefore, this deduction is needed to avoid double taxation, and no revenue is lost to the State.
27. Deduction for Sale of a Manufactured Home Community to Manufactured Home Owners
Citation: G.S. 105-130.5(b)(24)
Description: Taxpayers may deduct 5% of the gross purchase price of a qualified sale of a manufactured home community from federal taxable income. To qualify, the sale must be a one-time event to a group composed of a majority of the community's leaseholders or to a nonprofit organization that represents the group of leaseholders and notice of the sale must be given to the NC Housing Finance Agency.
Enacting Legislation: S.L. 2008-107 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: expires for taxable years beginning on or after January 1, 2015
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data; North Carolina Housing Finance Agency
28. Deferred Cancellation of Indebtedness
Citation: G.S. 105-130.5(b)(25)
Description: Deduction for the amount added to federal taxable income as deferred income under section 108(i)(1) of the Code. This deduction applies to taxable years beginning on or after Jan. 1, 2014.
Enacting Legislation: S.L. 2009-451
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by G.S. 105-130.5(a)(21), which requires the addition to taxable income for the amount deferred under section 108(i) of the Code, effective for taxable years beginning on or after Jan. 1, 2009.
Corporation Income Tax
42
29. Bonus Depreciation and Expensing Adjustment
Citation: G.S. 105-130.5(b)(27)
Description: The Code has allowed bonus depreciation allowances and expanded Section 179 expensing for certain years between 2002 and 2013. North Carolina has decoupled from these provisions by having taxpayers add back a percentage of the federal deduc-tion in each year and allowing taxpayers to deduct the addback over a period of 5 years in the future.
Enacting Legislation: S.L. 2002-126 was the first provision related to bonus depreciation addbacks; S.L. 2011-5 added the provision related to the addback for section 179 expensing
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by the required addition to taxable income in G.S. 105-130.5(a)(24). The net impact is to shift the lost revenue into future years. Thus, there is likely to be a positive impact on the present value of State revenues.
30. Savings & Loan Association Interest
Citation: G.S. 105-130.5(c)(5)
Description: A savings and loan association may deduct interest earned on deposits at the Federal Home Loan Bank of Atlanta, or its successor, to the extent included in federal taxable income.
Enacting Legislation: S.L. 1989-769 - effective for taxable years beginning on or after Jan. 1, 1989. This provision was originally included in G.S. 105-228.23(a).
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
31. Percentage Depletion over Cost Depletion
Citation: G.S. 105-130.5(a)(11)
Description: Allowance for percentage depletion over cost depletion for solid minerals or rare earths extracted from the soil or waters of this State.
Enacting Legislation: S.L. 1983-713 - effective for taxable years beginning on or after Jan. 1, 1983.
Estimate (in millions): FY13-14 ........ $8.9 FY14-15 ....... $10.1
Data Source: Department of Revenue tax data
Corporation Income Tax
43
32. Expenses Related to Untaxed Dividends for Bank Holding Company
Citation: G.S. 105-130.6A(e)
Description: If the attribution of expenses related to nontaxed dividends results in additional tax of more than $11 million to a bank holding company group, the group may reduce the attributed expenses so that the additional tax effect is $11 million.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $24.5 FY14-15 ....... $21.2
Data Source: Department of Revenue tax data
Note: See related tax credit (item #39).
33. Charitable Contributions Outside N.C.
Citation: G.S. 105-130.9(1)
Description: Deduction for charitable contributions. The amount of deduction for this item may not exceed 5% of the taxpayer's net income. Contributions made to out-of-state donees are multiplied by the taxpayer's apportionment factor.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $7.0 FY14-15 ....... $6.5
Data Source: Department of Revenue tax data
Note: This estimate includes only contributions made to donees outside NC; see next item for deduction for donees in NC.
34. Charitable Contributions Within N.C.
Citation: G.S. 105-130.9(1)-(3)
Description: Most deductions are limited to 5% of the taxpayer's net income. Contributions to the State of North Carolina, its counties and municipalities and any agency or instrumentality of these institutions, in addition to contributions made to educational institutions located in North Carolina are fully deductible. For companies with income allocable outside North Carolina, charitable contributions to donees inside NC are not reduced by multiplying by the taxpayer's apportionment factor.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $4.9 FY14-15 ....... $4.3
Data Source: Department of Revenue tax data
Corporation Income Tax
44
35. Amortization of Pollution Abatement Facilities and Equipment
Citation: G.S. 105-130.10
Description: In lieu of any depreciation allowance, a corporation may opt to deduct amortization of air-cleaning devices, waste treatment facilities, recycling facilities, equipment or plant used to provide sewer service to residential and outlying areas.
Enacting Legislation: S.L. 1939-158; S.L. 1969-817 added air-cleaning devices; S.L. 1975-764 added recycling facilities
Estimate (in millions): FY13-14 ........ $xx FY14-15 ....... $xx
Data Source: Department of Revenue tax data
36. Amortization of Equipment Mandated by OSHA
Citation: G.S. 105-130.10A
Description: In lieu of any depreciation allowance, a corporation may opt to deduct amortization of equipment mandated by the Occupational Safety and Health Act (OSHA), including the cost of planning, acquiring, constructing, modifying, and installing said equipment.
Enacting Legislation: S.L. 1979-776
Estimate (in millions): Unavailable
37. Credit for Bank Holding Companies Related to Expenses on Nontaxed Earnings
Citation: G.S. 105-130.6A(f)
Description: Credit for bank holding companies of $2 million if they are eligible for the cap in 105-130.6A(e). If a bank holding company (and its affiliated group) does not qualify for the cap, it may take a credit equal to the additional tax that would be due if the expense adjustment were 15% instead of 20%. The credit must be taken in 4 annual installments.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $2.8 FY14-15 ....... $3.0
Data Source: Department of Revenue tax data
Note: This credit may be taken against either the income tax or the franchise tax
Corporation Income Tax
45
38. Credit for Electric Power Holding Companies Related to Expenses on Nontaxed Earnings
Citation: G.S. 105-130.6A(g)
Description: After calculating the adjustment for expenses related to dividends under G.S. 105-130.5(c)(3), each electric power holding company must calculate the amount of additional tax that results from the expense adjustment for the taxable year. The electric power holding company is allowed a credit for the following taxable year equal to one-half of this amount of additional tax.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $1.0 FY14-15 ....... $1.0
Data Source: Department of Revenue tax data
Note: This credit may be taken against either the income tax or the franchise tax.
39. Equipment for Cogenerating Power Plant
Citation: G.S. 105-130.25
Description: Credit of 10% of the costs to purchase and install electrical or mechanical equipment for a cogenerating power plant. A cogenerating power plant uses natural gas as its primary energy source. The total amount of tax credits for all taxpayers for qualifying payments in a calendar year may not exceed $5,000,000. A public utility, as defined in GS 62-3(23) is not eligible for this credit.
Enacting Legislation: S.L. 1979-801; S.L. 1993-674 limited the primary source of fuel to natural gas, effective Jan. 1, 1998.
Estimate (in millions): Unavailable
40. Credit for Costs at NC Ports
Citation: G.S. 105-130.41
Description: Credit for loading or unloading cargo at a State-owned port terminal at Wilmington or Morehead City. The credit is equal to the excess of the wharfage, handling, and throughput charges for the current taxable year over the average amount for the current year and the two preceding years. The credit applies to forest products, break-bulk cargo and container cargo. The credit may not exceed 50% of tax liability after other credits have been applied. Unused credits may be carried forward 5 years. The maximum cumulative credit for a corporation is $2 million.
Enacting Legislation: S.L. 1991-977 - effective for taxable years beginning on or after March 1, 1992
Sunset Date: Expires for taxable years beginning on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.5 FY14-15 ....... $0.3
Data Source: Department of Revenue "Economic Incentive Reports”
Corporation Income Tax
46
41. Credit for Manufacturing Cigarettes for Exportation
Citation: G.S. 105-130.45
Description: Credit of up to $6,000,000 is allowed a company that exports cigarettes to a foreign country through the North Carolina State Ports. The amount of the credit depends on the volume of cigarettes exported compared to the volume in a base year. The amount of credit taken in a given tax year may not exceed 50% of the taxpayer's tax liability, less other credits. Unused credits may be carried forward for 10 years.
Enacting Legislation: S.L. 1999-333 - effective for taxable years beginning on or after Jan. 1, 1999
Sunset Date: Expires effective for cigarettes exported on or after Jan. 1, 2018
Estimate (in millions): FY13-14 ........ $5.6 FY14-15 ....... $5.6
Data Source: Department of Revenue "Economic Incentive Reports”
42. Alternative Cigarette Export Credit
Citation: G.S. 105-130.46
Description: Credit of up to $10,000,000 is allowed a company that exports cigarettes to a foreign country through the North Carolina State Ports. The amount of the credit depends on the employment level at the company compared to the employment level in 2004. The amount of credit taken in a given tax year may not exceed 50% of the taxpayer's tax liability, less other credits. Unused credits may be carried forward for 10 years.
Enacting Legislation: S.L. 2003-435 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires effective for cigarettes exported on or after Jan. 1, 2018
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
43. Film Industry Production Expenses
Citation: G.S. 105-130.47
Description: A film or television production company that spends at least $250,000 in North Carolina on productions during the tax year is allowed a credit equal to up to 25% of the qualifying expenses. However, prior to January 1, 2010, the credit rate is 15%. A production company may include as qualifying expenses compensation paid to a highly compensated individual up to $1 million. The cost of production-related insurance coverage constitutes a qualifying expense as long as the coverage is not purchased form a related member. This tax credit is refundable if it exceeds income tax liability. The maximum credit for a feature film production is $20 million. No credit is allowed for productions related to political advertising, news programs, sporting events, or obscene material.
Enacting Legislation: S.L. 2005-276 - applies to qualifying expenses incurred on or after July 1, 2005; S.L. 2005-276 had a credit rate of 15% and a maximum credit for a feature film of $7,500,000. The tax credit replaced the film industry development grant program. S.L. 2009-529 created an alternative credit with credit rate of 25%, effective Jan. 1, 2010. S.L. 2010-147 increased the maximum credit for a feature film to $20 million. Corporation Income Tax
47
Sunset Date: Expires for qualifying expenses occurring on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $36.6 FY14-15 ....... $36.6
Data Source: Department of Revenue "Economic Incentive Reports”
44. Tax Credit for Recycling Oyster Shells
Citation: G.S. 105-130.48
Description: Taxpayers are allowed a credit of $1 per bushel of oyster shells donated to the Division of Marine Fisheries of the NC Department of Environmental and Natural Resources. The credit is not refundable. Any unused credit can be carried forward for the succeeding five years. A taxpayer who claims this credit must add back to taxable income any amount deducted under the Code for the donation of oyster shells.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires for taxable years beginning on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ < $0.1 FY14-15 ....... $0
Data Source: Department of Revenue tax data
Business and Energy Tax Credits
48
Methodology Note for all Business Incentive Credits (Article 3B through 3K):
In general, all of the tax credits in this chapter and the following, through the chapter on the Tax Incentives for Railroad Intermodal Facilities (Article 3K), share certain attributes that affect estimation of fiscal year budget effects. For instance, taxpayers may take credits only up to 50% of their net franchise tax or income tax liability for the year (with the exception of the refundable low-income housing credits and the credit for major computing manufacturing facilities). Also, in some cases the credits generated in a given year must be taken in installments over several succeeding years. These attributes can create a large difference in the amount of credits generated in a year and the amount of credits actually taken.
The estimates are based on Economic Incentive Reports produced by the N.C. Department of Revenue covering returns up through those processed in 2012, most of which were tax year 2011 forms. The reports provide detailed information on credits generated and credits taken by taxpayer and by Development Tier when applicable. These reports are available on the North Carolina Department of Revenue website.
1. Credit for Investing in Renewable Energy Property
Citation: G.S. 105-129.16A
Description: If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State, the taxpayer is allowed a credit equal to 35% of the cost of the property. The credits may not exceed (1) $2,500,000 for property that serves a business purpose, (2) $5,000,000 for business-related property in an Eco-Industrial Park, (3) $1,400 for solar energy equipment for residential water heating, (4) $3,500 for residential space heating, (5) $8,400 per installation of a geothermal heat pump or geothermal equipment, (6) $10,500 per installation of all other non-business renewable energy property. If the renewable property is placed in a non-business structure, the credit is taken in the year of installation. For other types of property, the credit must be taken in 5 annual installments, beginning in the year of installation.
Enacting Legislation: S.L. 1999-342; replaced various tax credits for renewable energy that were enacted in the 1970s and 1980s
Sunset Date: Expires for renewable energy property placed into service on or after Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $52.4 FY14-15 ....... $58.3
Data Source: Department of Revenue "Economic Incentive Reports”
Business and Energy Tax Credits
49
A note concerning the following three tax credits: the term “renewable fuels” refers to biodiesel, biodiesel mixes, and ethanol mixes that contain at least 70% ethanol by volume (G.S. 105-129.15(8)).
A taxpayer cannot claim the credits allowed under G.S. 105-129.16D(b) and G.S. 105-129.16D(b1) with respect to the same facility. A taxpayer that claims any other tax credit allowed under Chapter 105 with respect to the costs of constructing and installing a renewable energy facility may not take the credits allowed in this section with respect to the same costs.
2. Credit for Renewable Fuel Dispensing Facilities
Citation: G.S. 105-129.16D(a)
Description: A taxpayer that constructs and installs and places in service in this State a qualified commercial facility for dispensing renewable fuel is allowed a credit equal to 15% of the cost to the taxpayer of constructing and installing the part of the dispensing facility, including pumps, storage tanks, and related equipment, that is directly and exclusively used for dispensing or storing renewable fuel. This credit must be taken in 3 annual installments.
Enacting Legislation: S.L. 2004-153 - effective for taxable years beginning on or after Jan.1, 2005
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014
Estimate (in millions): less than $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
3. Credit for Constructing Renewable Fuel Processing Facilities
Citation: G.S. 105-129.16D(b)
Description: A taxpayer that constructs and places in service in this State a commercial facility for processing renewable fuel is allowed a credit equal to 25% of the cost to the taxpayer of constructing and equipping the facility. The credit must be taken in 7 annual installments. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 2004-153 - effective for taxable years beginning on or after Jan.1, 2005
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014. However, the sunset is extended to Jan. 1, 2017 if the taxpayer (1) signs a letter of commitment with the Department of Commerce on or before Sept. 1, 2013, stating the taxpayer's intent to construct and place into service in this State a commercial facility for processing renewable fuel and (2) begins construction of the facility on or before Dec. 31, 2013 (S.L. 2013-363).
Estimate (in millions): FY13-14 ........ $0.2 FY14-15 ....... $0.2
Data Source: Department of Revenue "Economic Incentive Reports”
Business and Energy Tax Credits
50
4. Alternate Credit for Constructing Renewable Fuel Facilities
Citation: G.S. 105-129.16D(b1)
Description: A taxpayer that invests at least $400,000,000 to construct and place in service in this State three or more commercial facilities for processing renewable fuel may receive a credit of 35% of the cost of constructing and equipping the facilities. The tax credit is taken in 7 equal installments and unused credits may be carried forward for 10 years. This credit may only be taken against the corporate income tax.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
5. Tax Credit to Refund Motor Fuel Excise Tax for Biodiesel
Citation: G.S. 105-129.16F
Description: A biodiesel provider that produces at least 100,000 gallons of biodiesel per year may receive a credit equal to the per gallon excise tax paid under Article 36C of Chapter 105. The credit does not apply to tax paid on diesel fuel included in a biodiesel blend. The maximum credit is $500,000.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... < $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
6. Work Opportunity Tax Credit
Citation: G.S. 105-129.16G
Description: A taxpayer who is allowed a federal tax credit under Part IV, Subpart F of the Code for the taxable year is allowed a credit against the tax imposed by this Part. The credit is equal to six percent (6%) of the amount of credit allowed under the Code for wages paid related to positions located in North Carolina.
Enacting Legislation: S.L. 2007-323 - effective for taxable years beginning on or after Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.8 FY14-15 ....... < $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
Note: The wages pertaining to this credit were previously deductible from NC taxable income under G.S. 105-130.5(b)(11) and G.S. 105-134.6(d)(2). The elimination of this deduction has been netted out of the estimate.
Business and Energy Tax Credits
51
7. Credit for Donations to a Nonprofit to Acquire Renewable Energy Property
Citation: G.S. 105-129.16H
Description: A taxpayer who donates money to a nonprofit organization or a unit of State or local government is allowed a credit if the funds are used by the donee to construct, purchase, or lease renewable energy property. The taxpayer may claim a tax credit equivalent to that given under G.S. 105-129.16A. The donation cannot be deducted as a charitable donation from the taxable income of the taxpayer.
Enacting Legislation: S.L. 2007-397 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): less than $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
8. Credit for a Renewable Energy Property Facility
Citation: G.S. 105-129.16I
Description: A taxpayer that places in service in this State a commercial facility for the manufacture of renewable energy property or a major component subassembly for a solar array or wind turbine is allowed a credit of 25% of the cost to construct/convert and equip the facility. The credit is taken in 5 annual installments.
Enacting Legislation: S.L. 2010-167 - effective for taxable years beginning on or after Jan. 1, 2011; a similar tax credit had existed as G.S. 105-130.28, which was enacted by S.L. 1981-921 and expired on Jan. 1, 2006
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $2.0 FY14-15 ....... $2.0
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Incentives for Recycling Facilities
52
See Methodology Note under Article 3B.
1. Credit for Investing in Major Recycling Facility
Citation: G.S. 105-129.27
Description: An owner that purchases or leases machinery and equipment for a major recycling facility in this State is allowed a credit equal to 50% of the amount payable by the owner during the taxable year to purchase or lease the machinery and equipment. Unused credits may be carried forward 25 years.
Enacting Legislation: S.L. 1998-55 - effective for taxable years beginning on or after Jan. 1, 1998
Estimate (in millions): FY13-14 ........ $3.2 FY14-15 ....... $3.7
Data Source: Department of Revenue "Economic Incentive Reports”
Historic Rehabilitation Tax Credits
53
See Methodology Note under Article 3B.
1. Credit for Rehabilitating Income-Producing Historic Structure
Citation: G.S. 105-129.35
Description: A taxpayer who is allowed a federal income tax credit under Section 47 of the Code for making qualified rehabilitation expenditures for a certified historic structure located in this State is allowed a credit equal to 20% of the expenditures that qualify for the federal credit. The tax credit is 40% if the certified historic structure is a facility that at one time served as a State training school for juvenile offenders. The tax credit is taken in 5 annual installments. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 1993-527 - effective for taxable years on or after Jan. 1, 1994; S.L. 1997-139 increased the credit from 5% to 20%; S.L. 2006-40 added the 40% credit
Sunset Date: Expires for qualified rehabilitation expenses incurred on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $8.0 FY14-15 ....... $6.8
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Rehabilitating Nonincome-Producing Historic Structure
Citation: G.S. 105-129.36
Description: A taxpayer who is not allowed a federal income tax credit under Section 47 of the Code and who makes rehabilitation expenses for a State-certified historic structure located in this State is allowed a credit equal to 30% of the rehabilitation expenses. The tax credit is 40% if the certified historic structure is a facility that at one time served as a State training school for juvenile offenders. To qualify for the credit, the taxpayer's expenses must exceed $25,000 within a 24-month period. The tax credit is taken in 5 annual installments. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 1997-139 - effective for taxable years beginning on or after Jan. 1, 1998; S.L. 2006-40 added the 40% credit
Sunset Date: Expires for qualified rehabilitation expenses incurred on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $5.7 FY14-15 ....... $4.8
Data Source: Department of Revenue "Economic Incentive Reports”
Low-Income Housing Tax Credits
54
See Methodology Note under Article 3B.
1. Credit for Low-Income Housing Awarded a Federal Credit Allocation before Jan. 1, 2003
Citation: G.S. 105-129.41
Description: A taxpayer that is allowed a federal income tax credit for low-income housing under Section 42 of the Code with respect to a qualified North Carolina low-income building is allowed a credit equal to a percentage of the federal credit. The credit must be taken in equal installments over 5 years and is limited to 50% of tax liability for the year claimed. Any unused credits may be carried forward for 5 succeeding years.
Enacting Legislation: S.L. 1999-360 - effective Jan. 1, 2000
Estimate (in millions): FY13-14 ........ < $0.1 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Low-Income Housing Awarded a Federal Credit Allocation on or after Jan. 1, 2003
Citation: G.S. 105-129.42
Description: A taxpayer that is allowed a federal income tax credit for low-income housing under Section 42 of the Code to construct or substantially rehabilitate a qualified North Carolina low-income housing development is allowed a credit equal to a percentage of the development's qualified basis. The percentage varies from 10% to 30%, depending on (1) the percentage of residential units that are affordable to low-income groups and (2) the income of the county or city where the housing is located. This credit may be refunded or may be used to generated a loan from the North Carolina Housing Finance Agency.
Enacting Legislation: S.L. 2002-87 - effective Jan. 1, 2003
Sunset Date: Expires for developments to which federal credits are allocated on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $50.0 FY14-15 ....... $41.0
Data Source: Department of Revenue "Economic Incentive Reports”
Research & Development Credits
55
See Methodology Note under Article 3B.
1. Small Business R&D Credit
Citation: G.S. 105-129.55(a)(1)
Description: A small business thas has qualified North Carolina research expenses for the taxable year is allowed a credit equal to 3.25% of the expenses. A small business is defined as a business whose annual receipts did not exceed $1 million. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $0.3 FY14-15 ....... $0.4
Data Source: Department of Revenue "Economic Incentive Reports”
2. Low-Tier R&D Credit
Citation: G.S. 105-129.55(a)(2)
Description: A taxpayer that performs research in a development tier one area is allowed a 3.25% credit for eligible expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $3.4 FY14-15 ....... $3.5
Data Source: Department of Revenue "Economic Incentive Reports”
3. University Research Credit
Citation: G.S. 105-129.55(a)(2a)
Description: A taxpayer that has NC university research expenses for the taxable year is allowed a credit equal to 20% of the expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.7
Data Source: Department of Revenue "Economic Incentive Reports” Research & Development Credits
56
4. Eco-Industrial Park R&D Credit
Citation: G.S. 105-129.55(a)(2b)
Description: A taxpayer that performs research in an Eco-Industrial Park certified under G.S. 143B-437.08 is allowed a 35% credit for eligible expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carried forward 15 years.
Enacting Legislation: S.L. 2010-147 - effective for taxable years beginning on or after Jan. 1, 2011
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): Unavailable
Data Source: Department of Revenue "Economic Incentive Reports”
Note: No credits have been taken through tax year 2011.
5. Other R&D Credit
Citation: G.S. 105-129.55(a)(3)
Description: A taxpayer that has qualified North Carolina research expenses not covered under another subdivision of this section is eligible for 1.25% credit on expenses up to $50 million; 2.25% of expenses between $50 million and $200 million; and 3.25% of expenses over $200 million. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $40.1 FY14-15 ....... $42.1
Data Source: Department of Revenue "Economic Incentive Reports”
6. Interactive Digital Media Credit
Citation: G.S. 105-129.56
Description: A taxpayer that develops in this State interactive digital media or a digital platform or engine for use in interactive digital media is allowed a credit of 15% of eligible expenses over $50,000. The credit is 20% for allowable expenses paid to a community college or a research university. The credit may not exceed $7.5 million per taxpayer. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward 15 years.
Enacting Legislation: S.L. 2010-147 - effective for taxable years beginning on or after Jan. 1, 2011
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $2.9 FY14-15 ....... $2.2
Data Source: Department of Revenue "Economic Incentive Reports”
Mill Rehabilitation Tax Credit
57
See Methodology Note under Article 3B.
1. Credit for Income-Producing Rehabilitated Mill Property
Citation: G.S. 105-129.71
Description: A taxpayer who makes qualified rehabilitation expenditures for a certified historic mill or agricultural warehouse located in this State is allowed a credit equal to 40% of the expenditures if the building is located in a Development Tier 1 or 2 area or 30% if the building is located in a Development Tier 3 area. A certificate from the State Historic Preservation Officer must be obtained which shows that the expenditures qualified for a Federal rehabilitation credit under section 47 of the Code and that the expenses exceeded $3,000,000. Unused credits can be carried forward for 9 years.
Enacting Legislation: S.L. 2006-40 - effective for taxable years beginning on or after Jan. 1, 2006 and applies to eligible sites placed into service on or after July 1, 2006
Sunset Date: Expires for projects for which an application for an eligibility certification is submitted on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $12.5 FY14-15 ....... $9.0
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Nonincome-Producing Rehabilitated Mill Property
Citation: G.S. 105-129.72
Description: A taxpayer who makes qualified rehabilitation expenditures for a certified historic mill or agricultural warehouse located in this State is allowed a credit equal to 40% of the expenditures if the building is located in a Development Tier 1 or 2 area. A certificate from the State Historic Preservation Officer must be obtained which shows that the expenditures are for a certified historic structure and that the expenses exceeded $3,000,000. This credit must be taken in 5 annual installments. Unused credits may be carried forward 9 years.
Enacting Legislation: S.L. 2006-40 - effective for taxable years beginning on or after Jan. 1, 2006 and applies to eligible sites placed into service on or after July 1, 2006
Sunset Date: Expires for projects for which an application for an eligibility certification is submitted on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.5
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Credits for Growing Businesses
58
See Methodology Note under Article 3B.
Eligible businesses: These credits are only available to establishments whose primary business is one of the following: (1) air courier services hub, (2) aircraft maintenance and repair, (3) company headquarters that creates at least 75 additional jobs, (4) customer service call center, (5) electronic shopping and mail order house, (6) information technology and services, (7) manufacturing, (8) motorsports facility, (9) motorsports racing team, (10) research and development, (11) warehousing, and (12) wholesale trade.
Other eligibility conditions: The companies that qualify for these credits must meet certain eligibility requirements as laid out in G.S. 105-129.83. Establishments must generally meet wage standards, provide health insurance, have no outstanding citations related to environmental impacts and safety and health, and have no overdue tax debts.
Development tiers: Different credit rates and other conditions apply to businesses located in the three development tier zones. The designation of tiers is determined according to G.S. 143B-437.08.
Installments: Taxpayers generating credits under this article must take the credits in annual installments, beginning in the tax period following the period for which the credits were generated. There are 4 installments for the credits under G.S. 105-129.87 and G.S. 105-129.88 and 7 installments for credits under G.S. 105-129.89.
Carry-forwards: Unused credits under G.S. 105-129.87 and G.S. 105-129.88 may be carried forward for 5 years; unused credits under G.S. 105-129.89 may be carried forward for 15 years. Under certain conditions, a taxpayer may be eligible to take the carry-forwards for 20 years.
1. Credit for Creating Jobs
Citation: G.S. 105-129.87
Description: An eligible taxpayer is allowed a credit for creating jobs in this State. The amount of the credit is dependent on the development tier of the county in which the jobs are located. Additional credits are available for companies that create jobs in an urban progress zone, port enhancement zone or agrarian growth zone, as well as for new hires who reside in one of the zones or who were unemployed for at least 26 weeks before the date of hire.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $21.4 FY14-15 ....... $25.5
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Credits for Growing Businesses
59
2. Credit for Investing in Business Property
Citation: G.S. 105-129.88
Description: An eligible taxpayer is allowed a credit for placing business property in this State. The amount of the credit is dependent on the development tier of the county in which the property is located. Additional credits are available for companies that place business property in an urban progress zone, port enhancement zone or agrarian growth zone.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $54.9 FY14-15 ....... $60.4
Data Source: Department of Revenue "Economic Incentive Reports”
3. Credit for Investing in Real Property
Citation: G.S. 105-129.89
Description: An eligible taxpayer that purchases or leases real property in this State is allowed a credit equal to 30% of the eligible investment amount. The credit is applicable only for investments in a development tier 1 area.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.7
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Incentives for Railroad Intermodal Facilities
60
See Methodology Note under Article 3B.
1. Credit for Constructing a Railroad Intermodal Facility
Citation: G.S. 105-129.96
Description: A taxpayer that constructs or leases an eligible railroad intermodal facility in this State and places it in service during the taxable

North Carolina
Biennial Tax
Expenditure Report
2013
Revenue Research Division
North Carolina
Biennial Tax
Expenditure Report
2013
Revenue Research Division
North Carolina Department of Revenue
December 2013
275 copies of this report were printed at a cost of $613.25 or $2.23 per copy.
Table of Contents
Introduction ................................................................................................................................................. 1
Defining Tax Expenditures for this Study ................................................................................................. 1
Measuring the Fiscal Effects of Tax Expenditures .................................................................................... 2
Updates to the Tax Expenditure Report Since 2011 .................................................................................. 7
Tax Expenditures That Have Been Substantially Altered ......................................................................... 7
Extended Sunset Dates .............................................................................................................................. 8
New Tax Expenditure Provisions .............................................................................................................10
Repealed and Expired Tax Expenditures ..................................................................................................11
Privilege Taxes (Article 2) ...........................................................................................................................20
Tax Base Information ...............................................................................................................................20
Exemptions from license fee of $50 for attorneys-at-law and other professionals ...................................20
Exemptions from bank privilege tax .........................................................................................................21
Exemptions from $15 per ton tax on un-recycled newsprint ....................................................................21
Tobacco Products Tax (Article 2A) ...........................................................................................................22
Alcoholic Beverage License and Excise Taxes (Article 2C) .....................................................................24
Franchise Tax (Article 3) ............................................................................................................................26
Brief Description and Tax Base Information ............................................................................................26
Exemptions ..............................................................................................................................................26
Deductions ...............................................................................................................................................29
Tax Credits ..............................................................................................................................................32
Corporation Income Tax (Article 4, Part 1) ..............................................................................................33
Brief Description and Tax Base Information ............................................................................................33
Exemptions ..............................................................................................................................................34
Deductions ...............................................................................................................................................36
Tax Credits ..............................................................................................................................................44
Business and Energy Tax Credits (Article 3B) .........................................................................................48
Tax Incentives for Recycling Facilities (Article 3C) .................................................................................52
Historic Rehabilitation Tax Credits (Article 3D) ......................................................................................53
Low-Income Housing Tax Credits (Article 3E) ........................................................................................54
Research and Development Credits (Article 3F) ......................................................................................55
Mill Rehabilitation Tax Credit (Article 3H)..............................................................................................57
Tax Credits for Growing Businesses (Article 3J) .....................................................................................58
Tax Incentives for Railroad Intermodal Facilities (Article 3K) ..............................................................60
Individual Income Tax (Article 4, Part 2) .................................................................................................61
Brief Description and Tax Base Information ............................................................................................61 Table of Contents
ii
Exemptions ..............................................................................................................................................62
Deductions ...............................................................................................................................................62
Tax Credits ..............................................................................................................................................65
Sales and Use Tax (Article 5) ......................................................................................................................69
Tax Base Information ...............................................................................................................................69
Exemptions ..............................................................................................................................................74
Refunds ..................................................................................................................................................101
Preferential tax rates ...............................................................................................................................106
Highway Use Tax (Article 5A) ..................................................................................................................107
Tax Base Information .............................................................................................................................107
Tax Expenditures ...................................................................................................................................107
Scrap Tire Disposal Tax (Article 5B) .......................................................................................................111
White Goods Disposal Tax (Article 5C)...................................................................................................112
Taxes on Insurance Companies (Article 8B) ...........................................................................................113
Excise Tax on Conveyances (Article 8E) .................................................................................................115
Excise Tax on Motor Fuels (Article 36C) and Alternative Fuels (Article 36D)....................................117
Tax Base Information .............................................................................................................................117
Tax Expenditures ...................................................................................................................................117
Appendix A: Federal Tax Expenditure Flow-Throughs ........................................................................123
Appendix B: Other Tax Exclusions and Exemptions .............................................................................127
Index ..........................................................................................................................................................136
List of Tables
Table 1. Summary of Tax Expenditures ......................................................................................................... 3
Table 2. Forty Largest Tax Expenditures ....................................................................................................... 4
Table 3. Sales and Use Tax Expenditures .................................................................................................... 70
North Carolina Biennial Tax Expenditure Report
2013
In compliance with the requirements of Section 105-256 of the General Statutes of North Carolina, the Department of Revenue has prepared this report of tax expenditures contained in the Revenue Laws of North Carolina as amended through 2013. The listing of expenditures and measurements of their respective costs will allow legislative review of their impact on the State’s economy and on government revenues.
As in past publications, tax expenditures for each State-level tax are presented in a chapter of this report. At the beginning of each chapter, some basic information of the tax base and normal State tax rates for relevant fiscal years is presented. Each tax expenditure provision includes a General Statutes citation, a short description of the tax expenditure, and a “Data Source” that notes the source of the data used for the estimate. Also, many of the tax expenditures have a “Note” that details some additional information pertinent to the estimation of that particular tax expenditure. This information is to provide context for the estimates, and is not intended to represent the official interpretation of the Department of Revenue.
In this year’s report, we have added information on the “enacting legislation” related to each tax expenditure, as available. These notes attempt to provide the session laws that first incorporated each of the tax expenditures into statute. In some cases, additional notes are given referring to prior treatment of a provision or substantive changes that have occurred subsequent to the initial enactment. However, it was not in the scope of this report to provide a comprehensive history of every provision. (Many of the older provisions are only followed back to the major re-codifica-tion of the tax laws in S.L. 1939-158.)
Many of the tax expenditure provisions have sunset dates. Notes have been added to this year’s report to provide the current sunset dates attached to each provision, when applicable. This report includes any tax expenditures that are scheduled to sunset after December 2013.
Estimates of the cost of tax expenditures are provided for Fiscal Year 2013-14 and Fiscal Year 2014-15. The latter year was added to the report to provide a full-year impact of the many tax law changes that take effect in 2014.
A tax expenditure is defined as an exemption, exclusion, deduction, allowance, credit, refund, preferential tax rate or other device that reduces the amount of tax revenue which otherwise would be collected.
Tax expenditures are created to give economic assistance to certain groups of producers or consumers in the economy or to promote other policy goals. This report does not purport to evaluate the various expenditures as to equity or desirability from a public policy standpoint.
Introduction
2
Some tax expenditures are necessary. For instance, Constitutional restrictions forbid taxing the federal government’s purchases, as well as certain transactions involving interstate trade and commerce on Indian Reservations. Also, there are specific exemptions or exclusions that are made in order to avoid duplicate taxation of an activity. For example, S-corporations are not taxed on profits that are transferred to shareholders, who subsequently pay income taxes on these dividends. Also, some exemptions and exclusions that are necessary to define the appropriate tax base are not considered in the main body of this report. These types of tax expenditures are listed in Appendix B. No cost estimates are provided for these.
The sales tax presents the most ambiguous cases of when exemptions should be included as tax expenditures for this report. The sales tax is generally considered to be a tax on “final” purchases. Transactions involving the purchase of intermediate goods that will be further processed into a final good are properly exempted from the sales tax. It is arguable whether purchases of machinery, fuel or similar inputs used in production of final goods should be taxed. Since there is no consensus on this point, we include estimates of tax exemptions on inputs that are not used up in the production process. Sales tax exemptions that are excluded from estimation are included in Appendix B.
The term “preferential tax rate” has been interpreted to mean any rate that is less than the basic rate that applies to the largest number of taxpayers. In some instances higher rates are used on a relatively small number of taxpayers. In such cases, the lower general rates are not listed as preferential. Also, no preferential status is acknowledged when distinctly different bases are taxed at different rates under the same tax category. For example, under the alcoholic beverage taxes, different rates and bases are used to tax beer, wine, and spirituous liquor.
It should be noted at the outset of this report that the fiscal effects of tax expenditures are sometimes difficult to quantify. Several methods for estimating the costs of expenditures are used.
The most accurate source of information comes from actual tax returns that provide direct evidence of when certain expenditures are taken and the amounts of those expenditures. For example, we are able to use personal income tax and corporate income tax returns from 2009 and 2008 respectively to precisely measure the use of certain tax deductions and tax credits.
Sometimes, needed data are more timely and extensive at the national level than at the state level. When this occurs, the state-level data are estimated by determining North Carolina’s share of national activity. In these cases, several assumptions must be made to derive the final estimates. Therefore, these estimates are less reliable than those that can be measured directly.
For most national economic data, the share of North Carolina’s activities will consistently be in the range of 2.8% to 3.1%, which corresponds to North Carolina’s share of gross domestic product (GDP) and population. Therefore, national statistics are often multiplied by one of these percentages to estimate North Carolina’s value. However, when it is apparent that North Carolina’s data are not typical of national activity, such as textile or pharmaceutical manufacturing, attempts are made to use more representative proportions.
In some cases, sufficient data were not available to allow estimation of the value of an expenditure. In these cases, the expenditure estimate is designated as “unavailable.” Introduction
3
Table 1
Summary of Tax Expenditure Estimates for FY 2014-15 by Tax Category
Tax
Number of Tax Expenditures
Sum of Estimates of $100,000 and Over (Millions of Dollars)
Number Estimated to Be Less than $100,000
Number with Unavailable Estimate
Privilege Tax 6 0.3 4 0
Tobacco Products Tax 5 5.4 1 1
Alcoholic Beverage Tax 5 3.2 1 3
Franchise Tax 25 353.3 1 12
Corporation Income Tax 44 330.0 15 10
Various Tax Incentives
(Articles 3B through 3K) 25 261.8 6 2
Individual Income Tax 16 2,328.4 6 2
Sales and Use Tax 105 3,378.6 7 28
Highway Use Tax 15 144.2 0 10
Scrap Tire Disposal Tax 2 0.6 0 1
White Goods Disposal Tax 1 0.0 1 0
Taxes on Insurance
Companies 6 189.2 0 1
Excise Stamp Tax on
Conveyances 8 0 0 8
Excise Taxes on Motor Fuels 20 77.8 3 1
Totals 283 7,072.8 45 79 The sum of the estimates is provided for comparative purposes only. It should not be interpreted as the total gain to state revenue from eliminating all tax expenditures listed in this report. The total impact may be larger or smaller than this amount, depending on the interactions of the various tax expenditures.
The fiscal year 2014-15 Federal income tax expenditures that flow through to North Carolina income taxes are estimated in Appendix A. The individual income tax provisions total $5,195.0 million; the estimates for the corporate income tax provisions (excluding accelerated depreciation of equipment) total $152.5 million.
Introduction
4
Table 2
Forty Largest Tax Expenditures in North Carolina in FY 2014-15
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
1
Individual Income Tax
2
153.5(a)(1)
Standard Deduction in Excess of Base Amounts
1,233.1
2
Sales & Use Tax
80
164.13B
Food for Home Consumption
720.5
3
Sales and Use Tax
21
164.13(13)
Prescription Drugs and Insulin for Human Use
523.1
4
Sales and Use Tax
37
164.13(32)
Motor Vehicle Exemption Less Highway Use Tax
517.4
5
Individual Income Tax
3
153.5(a)(2)
Itemized Deduction in Excess of Standard Deduction
486.6
6
Individual Income Tax
6
153.5(a)(3)
Social Security Benefits in Excess of Federal Limit
383.9
7
Individual Income Tax
7
153.5(b)(5)
Government Retirement Income under Bailey Decision
366.8
8
Sales and Use Tax
9
164.13(5a)
Items Taxed by Article 5F
223.1
9
Sales and Use Tax
93
164.14(b)
Refunds to Nonprofits
221.0
10
Individual Income Tax
11
153.10(a)
Credit for Children
178.2
11
Sales and Use Tax
87
164.13E(6)a
Feeds, Litter and Medications for Farming
174.3
12
Taxes on Insurance Premiums
2
228.5(c)(2)
Premiums Received from Annuities
147.5
13
Corporation Income Tax
13
130.5(b)(4)
Net Economic Loss Carryforward
143.7
14
Franchise Tax
25
120.2(b)(1)
Cap for Holding Companies
135.0
15
Franchise Tax
2
125(a)(1)
Charitable Nonprofits
128.8
Introduction
5
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
16
Sales and Use Tax
66
164.13(57)
Piped Natural Gas Used by Manufacturers
116.4
17
Sales and Use Tax
29
164.13(23)a
Packaging Items for Manufacturers
113.7
18
Sales and Use Tax
56
164.13(51)
Water Delivered Through Main Pipes
108.9
19
Highway Use Tax
3
187.3(b)
Trade-In Allowance on Sales of Motor Vehicles
106.3
20
Sales and Use Tax
65
164.13(57)
Electricity Used by Manufacturers
92.3
21
Sales and Use Tax
95
164.14(c)
Refunds to Certain Local Government Entities
84.8
22
Sales and Use Tax
20
164.13(12)
Durable Medical Equipment
77.5
23
Tax Credits for Growing Businesses
2
129.88
Credit for Investing in Business Property
60.4
24
Business and Energy Tax Credit
1
129.16A
Credit for Investing in Renewable Energy Property
58.3
25
Sales and Use Tax
10
164.13(5b)
Telephone Equipment
57.5
26
Corporation Income Tax
1
130.4
Double-Weighting of Sales Factor in Apportionment Formula
49.9
27
Franchise Tax
9
125(a)(9)
Other Organizations Exempt from Federal Income Tax
48.6
28
Individual Income Tax
4
153.5(b)(1)
N.C. and Nonprofit Education Institution Interest
42.5
29
Research and Development Credit
5
129.55(a)(3)
Other R&D Credit
42.1
30
Low-Income Housing Tax Credits
2
129.42
Credit for Low-Income Housing Awarded on or after Jan. 1, 2003
41.0
Introduction
6
Rank
Tax
Item
Citation
(G.S. § 105)
Short Title
FY 2015 Estimate
($ millions)
31
Sales and Use Tax
83
164.13E(2)
Fertilizers, Seeds and Related Items Sold to a Farmer
37.6
32
Corporation Income Tax
43
130.47
Film Industry Production Expenses
36.6
33
Excise Taxes on Motor Fuels
6
449.88(8)
Sales to County or Municipal Corporation
34.5
34
Tax Credits for Growing Businesses
1
129.87
Credit for Creating Jobs
25.5
35
Highway Use Tax
1
187.3(a)
Maximum Tax of $1,000 for Class A or Class B Commercial Motor Vehicles
24.8
36
Sales and Use Tax
84
164.13E(3)
Farm Machinery and Related Parts and Lubricants
23.3
37
Corporation Income Tax
11
130.5(b)(3a)
Dividends from Foreign Sources
22.6
38
Sales and Use Tax
82
164.13E(1)
Fuel and Electricity for Farming
22.0
39
Sales and Use Tax
30
164.13(23)a
Packaging Items for Retailers
21.7
40
Corporation Income Tax
32
130.6A(e)
Expenses Related to Untaxed Dividends for Bank Holding Companies
21.2
Report Updates
7
This section highlights changes to this report since the last publication in December 2011. These changes are listed in the following categories:
1. tax expenditures that have been substantially altered
2. tax expenditures that have had their sunset dates extended
3. new tax expenditures enacted
4. tax expenditures that have expired or been repealed
In several of the entries below, a brief description of the changes to the tax expenditure is provided. For a more complete description, see the annual “Tax Law Changes” publication located on the North Carolina Department of Revenue website.
1. Standard deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(a)(1)
Description of Changes: For tax years beginning on or after Jan. 1, 2014, standard deduction amounts have been increased. For single filers, the standard deduction amount increased from $3,000 to $7,500; for married filers, filing jointly, the standard deduction increased from $6,000 to $15,000; for heads of households, the deduction increased from $4,400 to $12,000.
2. Itemized deductions
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(a)(2)
Description of Changes: For tax years beginning on or after Jan. 1, 2014, itemized deductions have been limited to three components: (1) charitable deductions, (2) mortgage interest; and (3) real estate property taxes. The sum of the latter two deductions cannot exceed $20,000.
3. Child credit
Tax Category: Individual Income Tax
Citation: G.S. 105-153.10(a) – formerly G.S. 105-151.24
Description of Changes: For tax years beginning on or after Jan. 1, 2014, an additional $25 credit per qualifying child is allowed for taxpayers whose AGI is equal to or less than the following amounts by filing status: $40,000 for married filers, filing jointly; $32,000 for heads of households; $20,000 for single filers or married filers, filing separately.
4. Earned income tax credit
Tax Category: Individual Income Tax
Citation: G.S. 105-151.31
Description of Changes: For taxable years beginning on or after January 1, 2013, the NC earned income tax credit is reduced from 5% to 4.5% of the federal EIC. Also, the sunset has been extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36 for sunset extension and S.L. 2013-10 for rate reduction)
Report Updates
8
5. Credit for adoption expenses
Tax Category: Individual Income Tax
Citation: G.S. 105-151.32
Description of Changes: For taxable years beginning on or after January 1, 2013, the NC adoption tax credit is reduced from 50% to 30% of the federal adoption credit. Also, the sunset has been extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36 for sunset extension and S.L. 2013-10 for rate reduction)
6. Renewable fuel facilities credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16D
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
7. Biodiesel producer credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16F
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
8. Work opportunity tax credit
Tax Category: Business and Energy Tax Credit
Citation: G.S. 105-129.16G
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
9. Historic rehabilitation credits
Tax Category: Historic rehabilitation tax credit
Citation: G.S. 105-129.35 & G.S. 105-129.36
Description of Changes: The sunset is extended to tax years beginning before January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-36)
10. Mill rehabilitation credits
Tax Category: Mill rehabilitation tax credit
Citation: G.S. 105-129.71 & G.S. 105-129.72
Description of Changes: The sunset is extended to tax years beginning before January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-36)
11. Research and development tax credits
Tax Category: Research and Development Credits
Citation: G.S. 105-129.55
Description of Changes: The sunset is extended to tax years beginning before January 1, 2016. Previously, the sunset date was January 1, 2014. (S.L. 2013-316)
Report Updates
9
12. Article 3J tax credits
Tax Category: Tax Credits for Growing Businesses
Citation: G.S. 105-129.87, G.S. 105-129.88 & G.S. 105-129.89
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
13. Credit for premiums paid on long-term care insurance
Tax Category: Individual Income Tax
Citation: G.S. 105-151.28
Description of Changes: The sunset is extended to tax years beginning before January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
14. Film production credit
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.47& G.S. 105-151.22
Description of Changes: The sunset is extended to qualifying expenses occurring on or after January 1, 2015. Previously, the sunset date was January 1, 2014. (S.L. 2012-194)
15. Oyster shell recycling credit
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.48 & G.S. 105-151.30
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
16. Credit for qualified business investments
Tax Category: Individual Income Tax
Citation: G.S. 105-163.011
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
17. Passenger air carrier refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(1)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
18. Business in low-tier area refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(3)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
19. Aviation fuel for motorsports refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(4)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
Report Updates
10
20. Professional motor racing vehicle parts refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(5)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2016. Previously, the sunset date was January 1, 2013. (S.L. 2012-36; S.L. 2013-316)
21. Analytical services business refund
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14A(a)(6)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
22. Certain industrial facilities refunds
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.14B(b)
Description of Changes: The sunset is extended to tax years beginning on or after January 1, 2014. Previously, the sunset date was January 1, 2013. (S.L. 2012-36)
23. Deduction for Eugenics Sterilization Compensation Fund
Tax Category: Individual Income Tax
Citation: G.S. 105-153.5(b)(9)
Effective Date: Jan. 1, 2015. (S.L. 2013-360)
24. Exemption for service contract on exempt items, other than motor vehicles
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(61)
Effective Date: Jan. 1, 2014. (S.L. 2013-316; S.L. 2013-414)
25. Exemption for service contract on uncharged items
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(62)
Effective Date: Jan. 1, 2014. (S.L. 2013-316)
26. Temporary cap on motor fuels tax rate
Tax Category: Excise Tax on Motor Fuels
Citation: G.S. 105-449.80(a)
Effective Date: July 1, 2012 through June 30, 2013 (S.L. 2012-142); Oct. 1, 2013 through June 30, 2015. (S.L. 2013-316)
Report Updates
11
A note on repealed items related to the privilege tax on amusements: Under S.L. 2013-316, the privilege taxes on admissions to live entertainment and motion picture shows were repealed, effective Jan. 1, 2014, and these admission charges became taxable under the sales & use tax at the State general rate. Several exemptions were kept under G.S. 105-164.13(60), but those listed in this section were not. Note that some of the performances given by the following may now be exempt under G.S. 105-164.13(60)c.
27. Charitable performances by uncompensated local talent
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(1)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by local talent exclusively, for the benefit of religious, charitable, benevolent or educational purposes, as long as no compensation is paid to the local talent. (S.L. 2013-316)
28. NC Symphony Society
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(2)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by the NC Symphony Society, Inc. (S.L. 2013-316)
29. Outdoor historical dramas
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for performances by outdoor historical dramas, as specified in Article 19C of Chapter 143 of the General Statutes. (S.L. 2013-316)
30. First $1,000 of charitable amusements
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for the first $1,000 of gross receipts from amusements promoted and managed by civic organizations when the entire proceeds are used exclusively for civic and charitable purposes and not to defray the expenses of conducting the amusement. (S.L. 2013-316)
31. Amusements at nonprofit arts centers
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(7)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for dances, motion picture shows, and other amusements promoted and managed by a qualifying corporation that operates a center for the performing and visual arts if the dance or other amusement is held at the center. (S.L. 2013-316)
Report Updates
12
32. Amusements promoted by nonprofit arts organizations
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(7a)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for exhibitions, performances and entertainment promoted and managed by a nonprofit arts organization whose primary purpose is to create, produce, or support music, dance, literature or visual arts. (S.L. 2013-316)
33. Amusements by teen centers
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(8)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for persons exempt from income tax who are operating a teen center. (S.L. 2013-316)
34. Farm-related amusements
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-40(12)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an exemption from the 3% admissions tax for farm-related exhibitions, shows, attractions, or amusements offered on land used for bona fide farm purposes as defined in G.S. 153A-340. (S.L. 2013-316)
35. 1% tax on motion pictures
Tax Category: Privilege Tax on Amusements
Citation: G.S. 105-38.1(a)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a reduced tax rate from the general 3% rate for motion picture shows. (S.L. 2013-316)
36. Credit for low-income residential telephone service
Tax Category: Corporation Income Tax
Citation: G.S. 105-130.39
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit for a corporation that provided local telephone service to low-income residential consumers at reduced rates. The credit is equal to the difference between what the company actually charged these customers and the amount they would have charged at normal rates. (S.L. 2013-316)
37. Credit for S&L supervisory fees
Tax Category: Corporation Income Tax
Citation: G.S. 105-130.43
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit for savings and loan supervisory fees assessed by the Commissioner of Banks of the Department of Commerce. (S.L. 2013-316)
Report Updates
13
38. Personal exemption
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(a1)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision gave a taxpayer the same number of personal exemptions allowed under section 151 of the Code for the taxable year. The exemption amount was $2,000 if AGI was equal to or above the following limits by filing status: $100,000 if married filing jointly; $80,000 if head of household; $60,000 if single; $50,000 if married filing separately. If AGI was below these levels, the exemption amount was $2,500. (S.L. 2013-316)
39. Additional deduction for blind and elderly taxpayers
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(a2)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer that elected the standard deduction to deduct additional amounts for blind and elderly status. The amount was $600 for a married individual and $750 for a single individual who was not a surviving spouse. (S.L. 2013-316)
40. Private and government retirement plans
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income an amount up to $2,000 for private retirement plans or $4,000 for government retirement plans. For married filers filing jointly, the maximum amounts applied to each separately. (S.L. 2013-316)
Note: this does not impact the full deduction for North Carolina and federal government retirees who had 5 or more years of creditable service as of August 12, 1989.
41. Severance wages
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(11)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income severance wages from an employer. The amount of severance wages that could be deducted for the same termination was $35,000. (S.L. 2013-316)
42. Erroneous conviction and imprisonment
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(14)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid to the taxpayer under G.S. 148-84 for erroneous conviction and imprisonment. (S.L. 2013-316)
43. Interest earned on certain trusts
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(15)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the interest earned on a Trust established by two or more manufacturers to pay for damages. (S.L. 2013-316)
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44. Hurricane Floyd Reserve Fund
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(16)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid from the Hurricane Floyd Reserve Fund. (S.L. 2013-316)
45. Disaster Relief Reserve payments
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(18)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount paid for hurricane relief from the Disaster Relief Fund, not to include amounts paid for goods and services provided. (S.L. 2013-316)
46. Sale of a manufactured home community to leaseholders
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(19)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income 5% of the gross purchase price of a qualified sale of a manufactured home community. (S.L. 2013-316)
47. Business income deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(b)(22)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income up to $50,000 of net business income. For married filers filing jointly, the maximum amounts applied to each separately. (S.L. 2013-316)
48. Parental Savings Trust Fund deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income the amount contributed to an account in the Parental Savings Trust Fund of the State Education Assistance Authority. The maximum deduction was $2,500 ($5,000 for joint filers). (S.L. 2013-316)
49. Volunteer fire and rescue squad deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(6)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income $250 if the taxpayer was an eligible volunteer firefighter or an eligible volunteer rescue squad worker. (S.L. 2013-316)
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50. Educator expenses deduction
Tax Category: Individual Income Tax
Citation: G.S. 105-134.6(d)(9)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an eligible educator to deduct from income up to $250 paid or incurred in connection with certain education-related purchases, to the extent that a deduction for educator expenses had not been taken in determining adjusted gross income. (S.L. 2013-316)
51. Net economic losses incurred prior to January 1, 1989
Tax Category: Individual Income Tax
Citation: G.S. 105-134.7(a)(4)
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer to deduct from income net economic losses in the 5 years preceding Tax Year 1989, arising from business transactions, business capital, or business property. (S.L. 2013-316)
52. Construction of dwellings for handicapped persons
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.22 & G.S. 105-151.1
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed an owner of multifamily rental units located in this State a credit equal to $550 for each dwelling unit constructed that conforms to Volume I-C of the NC Building Code. (S.L. 2013-316)
53. Credit for child care and certain employment-related expenses
Tax Category: Individual Income Tax
Citation: G.S. 105-151.11
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a taxpayer a credit in proportion to the eligible federal credit for a percentage of employment-related expenses under Section 21 of the Code. The amount of expenses for which a credit was claimed many not exceed $3,000 for one qualifying household member or $6,000 for multiple qualifying members. (S.L. 2013-316)
54. Credit for certain real property donations
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.34 & G.S. 105-151.12
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of donations of real property for public beach access, public access to water or trails, fish and wildlife conservation, or other similar land conservation purposes. The credit could not exceed $500,000 ($250,000 for single individual filers). (S.L. 2013-316)
55. Credit for conservation tillage equipment
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.36 & G.S. 105-151.13
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of the cost of conservation tillage equipment for use in a farming business, including tree farming. The credit could not exceed $2,500. (S.L. 2013-316)
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56. Credit for gleaned crops
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.37 & G.S. 105-151.14
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 10% of the market price of unharvested crops donated by the grower to a qualified organization. (S.L. 2013-316)
57. Credit for the disabled
Tax Category: Individual Income Tax
Citation: G.S. 105-151.18
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit equal to ⅓ of the federal credit to a taxpayer who (1) was retired on disability, (2) at the time of retirement was totally or permanently disabled, and (3) claimed the federal credit for the elderly and disabled. A credit was also available for a disabled dependent. (S.L. 2013-316)
58. Credit for property taxes paid on farm machinery
Tax Category: Individual Income Tax
Citation: G.S. 105-151.21
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit to farmers and individual shareholders of S Corporations engaged in farming equal to the amount of property taxes paid on farm machinery, or attachments and repair parts for farm machinery. The credit could not exceed $1,000. (S.L. 2013-316)
59. Credit for construction of poultry composting facility
Tax Category: Corporation & Individual Income Tax
Citation: G.S. 105-130.44 & G.S. 105-151.25
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit of 25% of the installation, materials, and equipment costs of construction paid during the year. This credit may not exceed $1,000 for any single installation. (S.L. 2013-316)
60. Credit for charitable contributions by nonitemizers
Tax Category: Individual Income Tax
Citation: G.S. 105-151.26
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit to a taxpayer who elected the standard deduction on their Federal income tax equal to 7% of the taxpayer’s excess charitable contributions. Excess contributions were defined as those over 2% of the taxpayer’s adjusted gross income. (S.L. 2013-316)
61. Education credit for children with disabilities
Tax Category: Individual Income Tax
Citation: G.S. 105-151.33
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2014.
Description: This provision allowed a credit up to $3,000 per semester for each eligible dependent child who was a resident of this State and who was in grades K-12 in a nonpublic school or a public school that charges tuition. An eligible child must have received special education or related services on a daily basis; for initial eligibility, he or she must have been Report Updates
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enrolled in a public school for the two preceding semesters or been a preschool child receiving special education services through a public school. (S.L. 2013-316)
Note: This credit was effective beginning in tax year 2011 for semesters beginning on or after July 1, 2011. This credit was effectively replaced by a State-funded grant – see S.L. 2013-364.
62. Political parties financing fund designation
Tax Category: Individual Income Tax
Citation: G.S. 105-159.1
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2013.
Description: This provision allowed a taxpayer whose income tax liability was $3 or more to designate $3 of the tax to the North Carolina Political Parties Financing Fund for the use of the political party of the taxpayer’s choice. Couples who filed a joint return could designate $3 each. (S.L. 2013-381)
63. Public campaign fund designation
Tax Category: Individual Income Tax
Citation: G.S. 105-159.2
Repeal Effective Date: Tax years beginning on or after Jan. 1, 2013.
Description: This provision allowed a taxpayer whose income tax liability was $3 or more to designate $3 of the tax to the North Carolina Public Campaign Fund for voter materials related to the election of N.C. Supreme Court judges. Couples who filed a joint return could designate $3 each. (S.L. 2013-360)
64. Horse or mule sold to a farmer
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(1)c
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted the sale of a horse or mule for agricultural purposes. (S.L. 2013-316)
65. Chiropractors’ nutritional supplements
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(13c)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted nutrional supplements sold by a chiropractric physician at a chiropractic office to a patient as part of the patient’s plan of treatment. (S.L. 2013-316)
66. Food and prepared meals sold by institutions of higher education (public and private)
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(27)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted sales of food served to students in dining rooms regularly operated by State or private educational institutions or student organizations thereof (K-12 schools are exempt under a separate provision). (S.L. 2013-316)
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67. Bread sold at a bakery thrift store
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(27a)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of bread, rolls, and buns sold at a bakery thrift store. (S.L. 2013-316)
68. Sales of newspapers
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13(28)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision exempted sales of newspapers by street vendors, by vending machines and by subscription for door-to-door delivery. (S.L. 2013-316)
Note: As of January 1, 2014, sales of newspapers through vending machines would be taxed on 50% of the price, due to G.S. 105-164.13(50).
69. Sales of electricity to commercial laundries
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(1f)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision gave a preferential tax rate of 2.83% for sales of electricity to commercial laundries or dry-cleaning establishments. (S.L. 2013-316)
70. Sales of electricity to commercial businesses and residences
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(4a)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision gave a preferential tax rate of 3% for sales of electricity, other than sales of electricity to entities that were given a lower tax rate. (S.L. 2013-316)
71. Sales of manufactured homes
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(1a)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision gave a preferential tax rate of 2% on sales of manufactured homes, with a maximum of $300. (S.L. 2013-316)
72. Sales of modular homes and offices
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.4(a)(8)
Repeal Effective Date: Items purchased on or after January 1, 2014.
Description: This provision gave a preferential tax rate of 2.5% on sales of modular homes. (S.L. 2013-316)
73. Naturas gas received by a gas city
Tax Category: Piped Natural Gas Tax
Citation: G.S. 105-187.41(c)(1)
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted tax on piped natural gas received by a gas city for consumption or delivered by to a sales or transportation customer of that city. (S.L. 2013-316) Report Updates
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74. Sales & use tax holiday
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13C
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of various items, including certain clothing, computers, and school supplies during the first weekend of August. (S.L. 2013-316)
75. Energy Star sales tax holiday
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.13D
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision exempted sales of certain Energy Star products during the first weekend of November. (S.L. 2013-316)
76. Municipalities that sell electric power
Tax Category: Sales & Use Tax
Citation: G.S. 105-164.21A
Repeal Effective Date: Items purchased on or after July 1, 2014.
Description: This provision allowed a municipality that paid sales tax on electricity to deduct 3% of the difference between its gross receipts from sales of electricity for the preceding reporting period and the amount paid for purchased power and related services during that period. (S.L. 2013-316)
Privilege Taxes
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Privilege taxes are imposed for the privilege of carrying on business or doing a remunerative act within the State. Privilege taxes on corporations are discussed under the “franchise tax” article.
There is no standard tax base or tax rate for privilege taxes that covers all businesses or activities. However, in order to determine preferential tax rates and exclusions, the tax rate is assumed to be 3% when the tax base is gross receipts and $50 when there is a flat licensing fee.
In Fiscal Year 2012-13, approximately $46.8 million was collected from this tax.
The privilege taxes on admissions to live events and motion pictures are repealed effective Jan. 1, 2014. On that date, admission charges become taxable under the sales tax at the general State rate of 4.75%. Several exemptions that were retained now appear in the Sales & Use section of this report.
1. Professionals over 75 Years Old
Citation: G.S. 105-41(b)(1)
Description: Exemption from license fee for attorneys or other professionals who are over 75 years old.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: Relevant privilege tax collections for FY12-13 and share of affected group in workforce
2. Individuals Practicing Art of Healing
Citation: G.S. 105-41(b)(2)
Description: Exemption from license fee for individuals who practice the art of healing for a fee, if the person is an adherent of an established church or religious organization and confines the healing practice to prayer or spiritual means.
Enacting Legislation: S.L. 1957-1064
Estimate (in millions): less than $0.1
Data Source: Derived from Department of Revenue list of licenses
3. Blind Individuals
Citation: G.S. 105-41(b)(3)
Description: Exemption from license fee for blind individuals.
Enacting Legislation: S.L. 1998-95 - effective July 1, 1999
Privilege Taxes
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Estimate (in millions): less than $0.1
Data Source: Relevant privilege tax collections for FY12-13 and share of affected group in workforce
4. Savings Banks and Savings & Loan Associations
Citation: G.S. 105-102.3
Description: Exemption from bank privilege tax for savings institutions created under General Statute Chapter 54B, 54C or Home Owners' Loan Act of 1933.
Enacting Legislation: S.L. 1985-985 - effective July 11, 1986
Estimate (in millions): FY13-14 ........ $0.2 FY14-15 ....... $0.2
Data Source: North Carolina Commissioner on Banks; Federal Depositors' Insurance Corporation
Note: The privilege tax on banks is $30 for each $1,000,000 or fractional part thereof of total assets.
5. Credit for Newsprint Recycling Program
Citation: G.S. 105-102.6(c)
Description: A publisher who has developed and operates or contracts for the operation of a newspaper or magazine recycling program shall receive 1 ton of credit toward its recycled content goall for each ton of recycling.
Enacting Legislation: S.L. 1995-459; S.L. 1999-346 added magazine recycling and increased the credit from ½ ton to 1 ton
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... $0.1
Data Source: Department of Revenue tax data
6. Unavailability of Recycled Newsprint
Citation: G.S. 105-102.6(e)
Description: Exemption from tax on unrecycled paper if recycled newsprint is unavailable due to (1) high price, (2) comparable quality or (3) time constraints.
Enacting Legislation: S.L. 1991-539 - effective Oct. 1, 1991
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Tobacco Tax
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A cigarette tax is levied on the sale or possession for sale in this State, by a distributor, of all cigarettes. Other tobacco products are taxed when a wholesale dealer or retail dealer first acquires or otherwise handles the products subject to the tax.
As of Sept. 1, 2009, the tax rate on a 20-pack of cigarettes is 45¢ and the tax rate on other tobacco products is 12.8% of the cost price.
During Fiscal Year 2012-13, approximately $281.1 million was collected from this tax.
1. Discount for Timely Reports -- Cigarettes
Citation: G.S. 105-113.21(a1)
Description: A distributor who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%. The current statute states that "(t)his discount covers expenses incurred in preparing the records and reports required by this Part, and the expense of furnishing a bond."
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003 (S.L. 1969-1075).
Estimate (in millions): FY13-14 ........ $4.8 FY14-15 ....... $4.7
Data Source: Department of Revenue tax data
Note: This provision was effective beginning August 1, 2004. There was a 4% discount prior to August 1, 2003
2. Refund for Unsalable Cigarettes
Citation: G.S. 105-113.21(b)
Description: Refund for unsalable cigarettes upon which the tax has been paid.
Enacting Legislation: S.L. 1993-442
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... $0.1
Data Source: Department of Revenue tax data
Tobacco Tax
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3. Sample Tobacco Products
Citation: G.S. 105-113.35(a)(3)
Description: The tax does not apply to a sample tobacco product distributed without charge.
Enacting Legislation: S.L. 1991-689 – effective Jan. 1, 1992 (this act created the tax on other tobacco products)
Estimate (in millions): Unavailable
Data Source: Department of Revenue tax data
4. Discount for Timely Reports -- Other Tobacco Products
Citation: G.S. 105-113.39(a)
Description: A wholesale dealer or retail dealer who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%.
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003.
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.6
Data Source: Department of Revenue tax data
5. Refund for Unsalable Tobacco Products
Citation: G.S. 105-113.39(b)
Description: A wholesale dealer or retail dealer in possession of stale or otherwise unsalable tobacco products upon which the tax has been paid may return the tobacco products to the manufacturer and apply to the Secretary for refund of the tax.
Enacting Legislation: S.L. 2005-406 - effective Sept. 1, 2005
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Alcoholic Beverage License and Excise Taxes
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Excise taxes are levied on beer and wine based on volume; excise taxes are levied on liquor sold by ABC stores based on price. These excise taxes are in addition to sales & use tax, as well as other charges on sales of liquor.
As of Sept. 1, 2009, the tax on beer is 61.71¢ per gallon; the tax on unfortified wine is 26.34¢ per liter; the tax on fortified wine is 29.34¢ per liter; the tax on liquor is 30% of the sum of the distiller's price, the State ABC warehouse freight and bailment charges, and a markup for local ABC boards.
During Fiscal Year 2012-13, $331.2 million was collected from this tax. Of this amount, $32.6 million was distributed to local governments.
1. Beer and Wine Destroyed by a Major Disaster
Citation: G.S. 105- 113.81(a)
Description: Excise taxes are not required to be paid on malt beverages or wine rendered unsalable by a major disaster.
Enacting Legislation: S.L. 1967-759 - effective Jan. 1, 1968; this provision was enacted as G.S. 18.81(i)
Estimate (in millions): Unavailable
2. Beer and Wine for Oceangoing Vessels
Citation: G.S. 105- 113.81(b)
Description: Excise taxes are not required to be paid on malt beverages or wine sold and delivered for use on oceangoing vessels. Sales made to officers, agents, crewmen, or passengers for their personal use are not exempt.
Enacting Legislation: S.L. 1963-992
Estimate (in millions): Unavailable
3. Brewery and Winery Tastings
Citation: G.S. 105- 113.81(e)
Description: Resident breweries and wineries are not required to remit excise taxes on malt beverages and wine given free of charge to customers, visitors, and employees on the manufacturer's licensed premises for consumption on those premises.
Enacting Legislation: S.L. 1985-114 - effective April 23, 1985
Estimate (in millions): Unavailable
Alcoholic Beverage License and Excise Taxes
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4. Discount for Timely Reports
Citation: G.S. 105-113.85
Description: A wholesaler or importer who files a timely report and sends a timely payment may deduct from the amount due a discount of 2%. The current statute states that "(t)his discount covers losses due to spoilage and breakage, expenses incurred in preparing the records and reports required by this Article, and the expense of furnishing a bond."
Enacting Legislation: S.L. 2004-84 - effective for reporting periods beginning on or after August 1, 2004; there was a 4% discount prior to August 1, 2003 (S.L. 1969-1239)
Estimate (in millions): FY13-14 ........ $3.1 FY14-15 ....... $3.2
Data Source: Department of Revenue tax data
5. Sacramental Wine
Citation: G.S. 105-113.87(a)
Description: Refund for wine used for sacramental purposes.
Enacting Legislation: S.L. 1945-708 - this provision was enacted as G.S. 18-88.1
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Franchise Tax
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The franchise tax is composed of several categories: (1) a gross receipts tax on water and sewerage companies, (2) a tax on mutual burial associations based on membership, and (3) a tax on domestic and foreign corporations and holding companies. All the tax expenditures in this section are derived from the third type, which is also referred to as the “general business franchise tax.”
The general business franchise tax is a privilege tax on corporations operating in North Carolina. The tax is currently $1.50 for every $1,000 of the largest of the following three measures:
1. the total amount of capital stock, surplus and undivided profits
2. the net accounting value of real and tangible property in the State
3. 55% of the appraised value of real and tangible property in the State
For corporations doing business both in and outside North Carolina, the share of capital stock apportioned to North Carolina is calculated by the same method used for the corporation income tax: the average of the corporation’s shares of property, payroll and sales, with the sales factor double-weighted.
The minimum franchise tax is $35. For tax year 2008, 49% of C-corporations and 53% of S-corporations paid the minimum amount.
In Fiscal Year 2012-13, North Carolina collected approximately $518.8 million in general business franchise taxes.
1. Double-Weighting of Sales Factor in Apportionment of Capital Stock
Citation: G.S. 105-122(c1)(1)
Description: The capital stock, surplus and undivided profits of a corporation are apportioned using the formula in G.S. 105-130.4, which doubles the relative importance of the company's sales in the State.
Enacting Legislation: S.L. 1988-994 - effective for tax years beginning on or after Jan. 1, 1989
Estimate (in millions): FY13-14 ........ $16.2 FY14-15 ....... $16.8
Data Source: Department of Revenue tax data
Note: There are several types of companies that do not use the double-weighted sales factor to calculate their apportionment percentage. These include building or construction contractors, several types of financial companies, motor carriers, public utilities, railroad companies, and corporations that receive more than 50% of their income from intangible property.
Franchise Tax
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2. Charitable Nonprofits
Citation: G.S. 105-125(a)(1)
Description: Charitable, religious, fraternal, benevolent, scientific or educational nonprofit.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $122.7 FY14-15 ....... $128.8
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
3. Local Mutual Nonprofits
Citation: G.S. 105-125(a)(3)
Description: Mutual ditch or irrigation association, mutual or cooperative telephone association, mutual canning association, cooperative breeding association or similar corporation of a purely local character deriving receipts solely from assessments, dues, or fees collected from members for the sole purpose of meeting expenses.
Enacting Legislation: S.L. 1955-1313
Estimate (in millions): FY13-14 ........ $10.0 FY14-15 ....... $10.5
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
4. Cooperative Marketing Associations
Citation: G.S. 105-125(a)(4)
Description: Cooperative marketing associations that operate solely for the purpose of marketing the products of members or other farmers and returns proceeds of sales to members and farmers, less operating costs.
Enacting Legislation: S.L. 1955-1313
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.7
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
5. Production Credit Association
Citation: G.S. 105-125(a)(5)
Description: Nonprofit production credit association organized under federal Farm Credit Act of 1933.
Enacting Legislation: S.L. 1963-601
Estimate (in millions): FY13-14 ........ $0.9 FY14-15 ....... $0.9
Data Source: Based on capital stock and retained earnings of the three farm credit associations in North Carolina
Franchise Tax
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6. Nonprofit Clubs
Citation: G.S. 105-125(a)(6)
Description: Clubs organized and operated exclusively for pleasure, recreation, or other nonprofit purposes, a civic league operated solely for the promotion of social welfare, a business league, or a board of trade.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $5.2 FY14-15 ....... $5.5
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
7. Chambers of Commerce
Citation: G.S. 105-125(a)(7)
Description: Chamber of commerce or merchants' association, not organized for profit.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $2.9 FY14-15 ....... $3.0
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS)
8. Homeowners' Associations
Citation: G.S. 105-125(a)(8)
Description: Condominium association, homeowners' association, or cooperative housing corporation not organized for profit.
Enacting Legislation: S.L. 1975-591 - effective for taxable years beginning on or after Jan. 1, 1975
Estimate (in millions): FY13-14 ........ $2.1 FY14-15 ....... $2.2
Data Source: Based on IRS data compiled by the National Center for Charitable Statistics (NCCS).
9. Miscellaneous Nonprofits
Citation: G.S. 105-125(a)(9)
Description: Other organizations exempt from federal income tax under the Code.
Enacting Legislation: S.L. 1983-713 - effective for taxable years beginning on or after Jan. 1, 1983
Estimate (in millions): FY13-14 ........ $45.4 FY14-15 ....... $48.6
Data Source: Estimate for credit unions from NC Deptment of Commerce, Credit Union Division Annual Report (2012).
Franchise Tax
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10. Real Estate Mortgage Investment Conduits
Citation: G.S. 105-125(a)
Description: An entity that qualifies as a real estate mortgage investment conduit, as defined in section 860D of the Code, is exempt from franchise taxes.
Enacting Legislation: S.L. 1993-494 - effective for taxable years beginning on or after Jan. 1, 1993
Estimate (in millions): Unavailable
11. Deduction from Capital Stock for Legal Liabilities
Citation: G.S. 105-122(b)(1)
Description: Deduction from capital stock base for definite and accrued legal liabilities.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
12. Deduction from Capital Stock for Billings in Excess of Costs
Citation: G.S. 105-122(b)(1a)
Description: Effective January 1, 2010 (Tax Year 2009 returns): Deduction for billings in excess of costs that are considered a deferred liability under the percentage of completion method of revenue recognition.
Enacting Legislation: S.L. 2009-422 - effective for taxable years beginning on or after Jan. 1, 2010
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax records
13. Deduction from Capital Stock for Taxes, Dividends, and Depreciation
Citation: G.S. 105-122(b)(2)
Description: Deduction from capital stock base for taxes accrued, dividends declared, and reserves for depreciation of tangible assets and for amortization of intangible assets as permitted for income tax purposes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
Franchise Tax
30
14. Deduction from Capital Stock for Deferred Tax Assets
Citation: G.S. 105-122(b)(3)
Description: When including deferred tax liabilities, a corporation may reduce the amount included in its base by netting against that amount deferred tax assets. The reduction may not decrease deferred tax liabilities below zero.
Enacting Legislation: S.L. 2006-95 - effective for taxable years beginning on or after Jan. 1, 2007
Estimate (in millions): Unavailable
15. Deduction from Capital Stock for Investments in Pollution Abatement Equipment
Citation: G.S. 105-122(b)(4)
Description: Deduction for cost of air-cleaning device or sewage or waste treatment plant and pollution abatement equipment.
Enacting Legislation: S.L. 1955-1100; S.L. 1967-892 added air-cleaning device and air pollution abatement equipment
Estimate (in millions): Unavailable
16. Deduction from Capital Stock for Investments in Hazardous Waste Abatement
Citation: G.S. 105-122(b)(5)
Description: Deduction for cost of purchasing equipment or constructing facilities for the purpose of recycling or reducing hazardous wastes.
Enacting Legislation: S.L. 1975-764 - effective for taxable years beginning on or after Jan. 1, 1976
Estimate (in millions): Unavailable
17. Deduction from Capital Stock for Facilities Used for Residential Sewer Services
Citation: G.S. 105-122(b)(6)
Description: Deduction for the cost of constructing facilities used to provide sewer services to residential and outlying areas.
Enacting Legislation: S.L. 1967-892
Estimate (in millions): Unavailable
18. International Banking Facility Capital Stock
Citation: G.S. 105-122(b)(8)
Description: The capital base of an international banking facility may be reduced by the excess of the amount of all assets employed outside the U.S. over liabilities owed to foreign persons.
Enacting Legislation: S.L. 1981-855
Estimate (in millions): Unavailable
Franchise Tax
31
19. Deduction from Property Investment for Expenses Related to Purchases of Real Estate
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments of reserves for depreciation and any indebtedness incurred by virtue of the purchase of any real estate and any improvements.
Enacting Legislation: S.L. 1947-501
Estimate (in millions): Unavailable
20. Deduction from Property Investment for Waste Abatement Investments
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments of cost of air-cleaning device or sewerage or waste treatment plant.
Enacting Legislation: S.L. 1955-1100; S.L. 1967-892 added air-cleaning device and air pollution abatement equipment
Estimate (in millions): Unavailable
21. Deduction from Property Investment for Investments in Rural Sewer Services
Citation: G.S. 105-122(d)
Description: Deduction from tangible property investments for the cost of constructing facilities built to provide sewer service to residential and outlying areas.
Enacting Legislation: S.L. 1967-892
Estimate (in millions): Unavailable
22. Real Estate Investment Trusts and Regulated Investment Corporations
Citation: G.S. 105-125(b)
Description: A regulated investment company or a non-captive REIT may deduct the aggregate market value of its investments in the stocks, bonds, debentures, or other securities or evidences of debt of other corporations, partnerships, individuals, municipalities, governmental agencies, or governments.
Enacting Legislation: S.L. 1951-937 - for regulated investment companies; S.L. 1971-820 - added REITs
Estimate (in millions): Unavailable
Franchise Tax
32
23. Tax Credit for LLCs Subject to Franchise Tax
Citation: G.S. 105-122.1
Description: Limited liability companies that are subject to the franchise tax are allowed a credit for the difference between the annual reporting fee for LLCs ($200) and the annual reporting fee for other corporations ($18 for electronic copy, $25 for paper copy). The amount of the credit cannot exceed the LLC's franchise tax liability for the year.
Enacting Legislation: S.L. 2006-66 – effective Jan. 1, 2007 (tax year 2006 returns). Prior to this, all LLCs were exempt from the franchise tax, but paid the higher reporting fee.
Estimate (in millions): FY13-14 ........ $0.3 FY14-15 ....... $0.4
Data Source: Department of Revenue C-corporation and S-corporation databases
24. Piped Natural Gas Credit
Citation: G.S. 105-122(d1)
Description: Tax credit of one-half amount of piped natural gas tax. The credit allowed may not exceed the tax amount reduced by all credits.
Enacting Legislation: S.L. 1998-22 – effective July 1, 1999.
Estimate (in millions): FY13-14 ........ $3.7 FY14-15 ....... $0.9
Data Source: Department of Revenue C-corporation and S-corporation databases
Note: The piped natural gas tax was repealed effective January 1, 2014.
25. Cap for Holding Companies
Citation: G.S. 105-120.2(b)(1)
Description: Maximum tax of $75,000 for holding companies. A holding company is any corporation which receives during its taxable year more than 80% of its gross income from corporations in which it owns directly or indirectly more than 50% of the outstanding voting stock.
Enacting Legislation: S.L. 1975-130 - effective Jan. 1, 1976
Estimate (in millions): FY13-14 ........ $132.0 FY14-15 ....... $135.0
Data Source: Department of Revenue C-corporation and S-corporation databases
Note: Approximately 74 companies were subject to this cap in tax year 2011 (2010 returns).
Corporation Income Tax
33
The corporation income tax is a tax on the net income of every domestic C corporation and of every foreign C corporation doing business in North Carolina.
Exclusions and exemptions under federal law are generally passed through to North Carolina in order to determine taxable income. There are, however, a number of additions to federal taxable income; significant among these additions are (1) taxes paid on net income, (2) interest from obligations of other states and their political subdivisions, (3) net operating loss carryforwards, (4) domestic production activities deduction, (5) expenses related to non-taxed income, and (6) royalty payments paid to related entities.
A dividends-received deduction is considered necessary for determining the corporate income tax base, as it avoids multiple layers of taxation on dividends that are passed between related corporate entities. The state dividends-received deduction conforms to the federal provision, with the exception that expenses related to the exempt dividends must be added to North Carolina taxable income.
For certain nonprofit organizations, such as charities, exemption from the corporate income tax is not considered a tax expenditure because promoting public welfare is central to their operations, and these entities are still taxed on their unrelated business activities. Also, certain nonprofit cooperative business organizations, such as trade associations, are excluded because their profits are distributed to members. These exemptions from the tax base are similar to those used by the Joint Committee on Taxation in preparing their list of federal tax expenditures.
The following chart shows the tax rates in effect during the relevant period covered by this report:
Taxable year beginning in
Tax Rate 2011 - 2013 6.9%
2014
6.0% 2015 5.0%
G.S. 105-130.5(a)(10) requires corporations to add the amount of most credits taken to their taxable income. The estimates of tax credits in this section were adjusted for this provision.
In Fiscal Year 2012-13, North Carolina collected approximately $1.3 billion in corporate income taxes.
Corporation Income Tax
34
1. Double-Weighting of Sales Factor in Apportionment Formula
Citation: G.S. 105-130.4
Description: For most corporations, business income is apportioned to North Carolina based on the share of (1) payroll, (2) property, & (3) sales in North Carolina. However, the sales factor is double-weighted.
Enacting Legislation: S.L. 1988-994 - effective for tax years beginning on or after January 1, 1989
Estimate (in millions): FY13-14 ........ $55.3 FY14-15 ....... $49.9
Data Source: Department of Revenue tax data
Note: There are several types of companies that do not use the double-weighted sales factor to calculate their apportionment percentage. These include building or construction contractors, several types of financial companies, motor carriers, public utilities, railroad companies, and corporations that receive more than 50% of their income from intangible property.
2. Sales-Only Apportionment for Capital-Intensive Corporations
Citation: G.S. 105-130.4(s1)
Description: All apportionable income of a qualified capital intensive corporation shall be apportioned by multiplying the income by the sales factor only. A capital-intensive corporation is one where the property factor exceeds 75% of the combined factors, with the sales factor double-weighted. The corporation must also invest at least $1 billion over 9 years in constructing a facility. The corporation is not eligible for tax credits under Article 3J [G.S. 105-129.83(m)].
Enacting Legislation: S.L. 2009-54 - effective for taxable years beginning on or after January 1, 2010
Estimate (in millions): FY13-14 ........ $24.6 FY14-15 ....... $20.8
Data Source: Department of Revenue tax data
3. Fraternal Beneficiary Societies
Citation: G.S. 105-130.11(a)(1)
Description: Exemption for fraternal beneficiary societies, orders or associations (a) operating under the lodge system or providing benefits to members of a lodge system and (b) providing for the payment of life, sick, accident, or other benefits of the organization or their dependents.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010," Statistics on Income, IRS
Note: Based on data for IRC 501(c)(8) organizations Corporation Income Tax
35
4. Certain Cooperative Companies
Citation: G.S. 105-130.11(a)(2)
Description: Exemption for nonprofit cooperative banks without capital stock and electric and telephone membership corporations organized under Chapter 117 of the General Statutes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $2.4 FY14-15 ....... $2.3
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
Note: Based on data for IRC 501(c)(14) organizations
5. Nonprofit Clubs
Citation: G.S. 105-130.11(a)(6)
Description: Exemption for nonprofit clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $0.5 FY14-15 ....... $0.6
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
Note: Based on data for IRC 501(c)(7) organizations
6. Local Mutual Nonprofits
Citation: G.S. 105-130.11(a)(7)
Description: Exemption for farmers' or other mutual hail, cyclone, or fire insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations of a purely local nature.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): less than $0.1
Data Source: Data on county farm mutual insurance companies, NC Department of Insurance; Department of Revenue tax data
Corporation Income Tax
36
7. Insurance Companies Taxed on Gross Premiums
Citation: G.S. 105-130.11(a)(11)
Description: Exemption for insurance companies paying the tax on gross premiums as specified in G.S. 105-228.5.
Estimate (in millions): FY13-14 ........ $0.0 FY14-15 ....... $0.0
Data Source: IRS Statistics of Income; Department of Revenue tax data
Note: The estimate is the amount of income tax that is estimated to be collected in excess of the amount of collections under the insurance gross premiums tax.
8. Homeowners' Associations
Citation: G.S. 105-130.11(a)(11)
Description: Exemption for nonprofit condominium associations, homeowners' associations, or cooperative housing corporation, although they are subject to tax on any unrelated business income.
Enacting Legislation: S.L. 1975-591 - effective for taxable years beginning on or after Jan. 1, 1975
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.6
Data Source: National Center for Charitable Statistics; “Charities and Other Tax-Exempt Organizations, 2010,” Statistics of Income, IRS
9. Nonprofit Unrelated Business Income from Research Activities
Citation: G.S. 105-130.11(b)
Description: Entities that are exempt in G.S. 105-130.11(a) are taxable on their unrelated business income, except if their net income is derived from certain research activities.
Enacting Legislation: S.L. 1963-1169 - effective for taxable years beginning on or after Jan. 1, 1963
Estimate (in millions): Unavailable
10. N.C. & Nonprofit Educational Institution Obligation Interest
Citation: G.S. 105-130.5(b)(1a)
Description: Deductions for interest on the obligations of this State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State, or a nonprofit educational institution.
Enacting Legislation: S.L. 1997-439 - effective for taxable years beginning on or after January 1, 1997. However, this was not a substantive change since interest has been exempt from income taxation under other long-standing statutes, e.g. G.S. 142.12.
Estimate (in millions): FY13-14 ........ $1.0 FY14-15 ....... $1.0
Data Source: IRS Statistics of Income; Department of Revenue tax data Corporation Income Tax
37
11. Dividends from Foreign Sources
Citation: G.S. 105-130.5(b)(3a)
Description: Deduction for dividends treated as received from sources outside the United States as determined under Section 862 of the Code, net of related expenses, to the extent included in federal taxable income.
Enacting Legislation: S.L. 2001-327
Estimate (in millions): FY13-14 ........ $23.1 FY14-15 ....... $22.6
Data Source: Joint Committee on Taxation
Note: The estimate is based on the expense addback that is foregone due to U.S. corporations delaying repatriation of dividends from controlled foreign subsidiaries.
12. Subpart F and Section 78 Gross-Up Dividends
Citation: G.S. 105-130.5(b)(3b)
Description: Deduction for any amount included in federal taxable income under section 78 or section 951 of the Code, net of related expenses.
Enacting Legislation: S.L. 2001-327
Estimate (in millions): Unavailable
13. Net Economic Loss Carryforward
Citation: G.S. 105-130.5(b)(4)
Description: Deduction for net economic losses in any or all of the 15 preceding income years, pursuant to the provisions of G.S. 105-130.8.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $186.3 FY14-15 ....... $143.7
Data Source: Department of Revenue tax data
14. Depreciation of Certain Emergency Facilities
Citation: G.S. 105-130.5(b)(7)
Description: Deduction for depreciation of emergency facilities acquired prior to Jan 1, 1955.
Enacting Legislation: S.L. 1957-1340
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
38
15. Net Capital Losses Not Deductible from Federal Taxable Income
Citation: G.S. 105-130.5(b)(8)
Description: Deduction for the amount of losses realized on the sale or disposition of assets not allowed under section 1211(a) of the Code. (For federal taxes, certain capital losses can only be used to offset capital gains; however, they can be carried back 3 years and forward 5 years.)
Enacting Legislation: S.L. 1939-158
Estimate (in millions): Unavailable
16. Shareholders of a Regulated Investment Company
Citation: G.S. 105-130.5(b)(9)
Description: Deduction of the portion of undistributed capital gains of a regulated investment company for which a shareholder in the company takes a federal credit or deduction under Section 852 of the Code.
Enacting Legislation: S.L. 1971-820 - effective for taxable years beginning on or after Jan. 1, 1971
Estimate (in millions): Unavailable
17. Reforestation and Cultivation of Trees
Citation: G.S. 105-130.5(b)(12)
Description: Deduction for reasonable expenses, in excess of deductions allowed under the Code, paid for reforestation and cultivation of commercially grown trees. (IRS Code Sec. 194 allows a deduction up to $10,000 for qualified reforestation expenses and 7-year amortization for the remaining amounts; Christmas trees do not qualify.)
Enacting Legislation: S.L. 1979-801 - effective for taxable years beginning on or after Jan. 1, 1979
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
18. Income from International Banking Facility
Citation: G.S. 105-130.5(b)(13)
Description: Deduction of the eligible income of an international banking facility to the extent included in determining federal taxable income. (An international banking facility allows depository institutions in the U.S. to offer deposit and loan services to foreign residents and institutions.)
Enacting Legislation: S.L. 1981-855
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
39
19. Basis Adjustment for Federal Tax Credit
Citation: G.S. 105-130.5(b)(14)
Description: Deduction for the amount that the basis of a depreciable asset is reduced due to a Federal tax credit or because of a grant allowed under section 1603 of the American Recovery and Reinvestment Tax Act of 2009.
Enacting Legislation: S.L. 1983-61 - effective for taxable years beginning on or after Jan. 1, 1983
Estimate (in millions): Unavailable
20. Marketing Assessments on Tobacco
Citation: G.S. 105-130.5(b)(15)
Description: Deduction for the amount paid, pursuant to 7 U.S.C. 1445-2, as marketing assessments on tobacco grown by a corporation in North Carolina.
Enacting Legislation: S.L. 1985-720 - effective for taxable years on or after Jan. 1, 1985
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue tax data
Note: The federal provisions on which the marketing assessments were based have been repealed in the American Jobs Creation Act of 2004 for 2005 and subsequent crops.
21. Natural Gas Expansion Surcharges
Citation: G.S. 105-130.5(b)(16)
Description: Deduction for the amount of natural gas expansion surcharges collected by a natural gas local distribution company.
Enacting Legislation: S.L. 1991-598 - effective July 8, 1991
Estimate (in millions): less than $0.1
Data Source: North Carolina Utilities Commission; Department of Revenue tax data
22. 911 Charges
Citation: G.S. 105-130.5(b)(17)
Description: To the extent included in federal taxable income, 911 charges imposed under G.S. 62A-43 and remitted to the 911 Fund under that section.
Enacting Legislation: S.L. 1998-158, as amended by S.L. 1999-337 - effective Sept. 25, 1998
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Corporation Income Tax
40
23. Earnings of Certain Trusts
Citation: G.S. 105-130.5(b)(18)
Description: Deduction of earnings on a trust for settlement of an agreement by two or more manufacturers with the State for potential claims against the manufacturers.
Enacting Legislation: S.L. 1999-333 - effective for taxable years beginning on or after Jan. 1, 1999
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
Note: This deduction was created for the National Tobacco Settlement Fund, which was established to distribute funds from tobacco companies to tobacco growers and allotment holders. The interest, investment earnings and gain of a qualified settlement fund are generally included in taxable income. The tobacco companies agreed to contribute to the Fund each year through 2010, but this was superseded by the 2004 Tobacco Buyout.
24. Income from Hurricane Floyd Reserve Fund
Citation: G.S. 105-130.5(b)(19)
Description: Deduction for the amount paid to taxpayer from the Hurricane Floyd Reserve Fund.
Enacting Legislation: S.L. 1999-463 - effective for taxable years beginning on or after Jan. 1, 1999
Estimate (in millions): less than $0.1
25. Disaster Relief Reserve Payments
Citation: G.S. 105-130.5(b)(22)
Description: Deduction for amounts paid to taxpayers for hurricane relief from the Disaster Relief Reserve Fund, not to include amounts paid for goods and services provided.
Enacting Legislation: S.L. 2005-1 - effective for taxable years beginning on or after Jan. 1, 2004
Estimate (in millions): Unavailable
Corporation Income Tax
41
26. Dividends from Captive REIT
Citation: G.S. 105-130.5(b)(23)
Description: Deduction for a dividend received from a captive REIT, as defined in G.S. 105-130.12.
Enacting Legislation: S.L. 2007-323 - effective for taxable years beginning on or after Jan. 1, 2007
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by G.S. 105-130.5(a)(19). A captive REIT must add to its taxable income any dividends paid to shareholders. Therefore, this deduction is needed to avoid double taxation, and no revenue is lost to the State.
27. Deduction for Sale of a Manufactured Home Community to Manufactured Home Owners
Citation: G.S. 105-130.5(b)(24)
Description: Taxpayers may deduct 5% of the gross purchase price of a qualified sale of a manufactured home community from federal taxable income. To qualify, the sale must be a one-time event to a group composed of a majority of the community's leaseholders or to a nonprofit organization that represents the group of leaseholders and notice of the sale must be given to the NC Housing Finance Agency.
Enacting Legislation: S.L. 2008-107 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: expires for taxable years beginning on or after January 1, 2015
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data; North Carolina Housing Finance Agency
28. Deferred Cancellation of Indebtedness
Citation: G.S. 105-130.5(b)(25)
Description: Deduction for the amount added to federal taxable income as deferred income under section 108(i)(1) of the Code. This deduction applies to taxable years beginning on or after Jan. 1, 2014.
Enacting Legislation: S.L. 2009-451
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by G.S. 105-130.5(a)(21), which requires the addition to taxable income for the amount deferred under section 108(i) of the Code, effective for taxable years beginning on or after Jan. 1, 2009.
Corporation Income Tax
42
29. Bonus Depreciation and Expensing Adjustment
Citation: G.S. 105-130.5(b)(27)
Description: The Code has allowed bonus depreciation allowances and expanded Section 179 expensing for certain years between 2002 and 2013. North Carolina has decoupled from these provisions by having taxpayers add back a percentage of the federal deduc-tion in each year and allowing taxpayers to deduct the addback over a period of 5 years in the future.
Enacting Legislation: S.L. 2002-126 was the first provision related to bonus depreciation addbacks; S.L. 2011-5 added the provision related to the addback for section 179 expensing
Estimate (in millions): no net negative impact; see note
Note: This deduction is offset by the required addition to taxable income in G.S. 105-130.5(a)(24). The net impact is to shift the lost revenue into future years. Thus, there is likely to be a positive impact on the present value of State revenues.
30. Savings & Loan Association Interest
Citation: G.S. 105-130.5(c)(5)
Description: A savings and loan association may deduct interest earned on deposits at the Federal Home Loan Bank of Atlanta, or its successor, to the extent included in federal taxable income.
Enacting Legislation: S.L. 1989-769 - effective for taxable years beginning on or after Jan. 1, 1989. This provision was originally included in G.S. 105-228.23(a).
Estimate (in millions): less than $0.1
Data Source: Department of Revenue tax data
31. Percentage Depletion over Cost Depletion
Citation: G.S. 105-130.5(a)(11)
Description: Allowance for percentage depletion over cost depletion for solid minerals or rare earths extracted from the soil or waters of this State.
Enacting Legislation: S.L. 1983-713 - effective for taxable years beginning on or after Jan. 1, 1983.
Estimate (in millions): FY13-14 ........ $8.9 FY14-15 ....... $10.1
Data Source: Department of Revenue tax data
Corporation Income Tax
43
32. Expenses Related to Untaxed Dividends for Bank Holding Company
Citation: G.S. 105-130.6A(e)
Description: If the attribution of expenses related to nontaxed dividends results in additional tax of more than $11 million to a bank holding company group, the group may reduce the attributed expenses so that the additional tax effect is $11 million.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $24.5 FY14-15 ....... $21.2
Data Source: Department of Revenue tax data
Note: See related tax credit (item #39).
33. Charitable Contributions Outside N.C.
Citation: G.S. 105-130.9(1)
Description: Deduction for charitable contributions. The amount of deduction for this item may not exceed 5% of the taxpayer's net income. Contributions made to out-of-state donees are multiplied by the taxpayer's apportionment factor.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $7.0 FY14-15 ....... $6.5
Data Source: Department of Revenue tax data
Note: This estimate includes only contributions made to donees outside NC; see next item for deduction for donees in NC.
34. Charitable Contributions Within N.C.
Citation: G.S. 105-130.9(1)-(3)
Description: Most deductions are limited to 5% of the taxpayer's net income. Contributions to the State of North Carolina, its counties and municipalities and any agency or instrumentality of these institutions, in addition to contributions made to educational institutions located in North Carolina are fully deductible. For companies with income allocable outside North Carolina, charitable contributions to donees inside NC are not reduced by multiplying by the taxpayer's apportionment factor.
Enacting Legislation: S.L. 1939-158
Estimate (in millions): FY13-14 ........ $4.9 FY14-15 ....... $4.3
Data Source: Department of Revenue tax data
Corporation Income Tax
44
35. Amortization of Pollution Abatement Facilities and Equipment
Citation: G.S. 105-130.10
Description: In lieu of any depreciation allowance, a corporation may opt to deduct amortization of air-cleaning devices, waste treatment facilities, recycling facilities, equipment or plant used to provide sewer service to residential and outlying areas.
Enacting Legislation: S.L. 1939-158; S.L. 1969-817 added air-cleaning devices; S.L. 1975-764 added recycling facilities
Estimate (in millions): FY13-14 ........ $xx FY14-15 ....... $xx
Data Source: Department of Revenue tax data
36. Amortization of Equipment Mandated by OSHA
Citation: G.S. 105-130.10A
Description: In lieu of any depreciation allowance, a corporation may opt to deduct amortization of equipment mandated by the Occupational Safety and Health Act (OSHA), including the cost of planning, acquiring, constructing, modifying, and installing said equipment.
Enacting Legislation: S.L. 1979-776
Estimate (in millions): Unavailable
37. Credit for Bank Holding Companies Related to Expenses on Nontaxed Earnings
Citation: G.S. 105-130.6A(f)
Description: Credit for bank holding companies of $2 million if they are eligible for the cap in 105-130.6A(e). If a bank holding company (and its affiliated group) does not qualify for the cap, it may take a credit equal to the additional tax that would be due if the expense adjustment were 15% instead of 20%. The credit must be taken in 4 annual installments.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $2.8 FY14-15 ....... $3.0
Data Source: Department of Revenue tax data
Note: This credit may be taken against either the income tax or the franchise tax
Corporation Income Tax
45
38. Credit for Electric Power Holding Companies Related to Expenses on Nontaxed Earnings
Citation: G.S. 105-130.6A(g)
Description: After calculating the adjustment for expenses related to dividends under G.S. 105-130.5(c)(3), each electric power holding company must calculate the amount of additional tax that results from the expense adjustment for the taxable year. The electric power holding company is allowed a credit for the following taxable year equal to one-half of this amount of additional tax.
Enacting Legislation: S.L. 2002-136 - effective for taxable years beginning on or after Jan. 1, 2001
Estimate (in millions): FY13-14 ........ $1.0 FY14-15 ....... $1.0
Data Source: Department of Revenue tax data
Note: This credit may be taken against either the income tax or the franchise tax.
39. Equipment for Cogenerating Power Plant
Citation: G.S. 105-130.25
Description: Credit of 10% of the costs to purchase and install electrical or mechanical equipment for a cogenerating power plant. A cogenerating power plant uses natural gas as its primary energy source. The total amount of tax credits for all taxpayers for qualifying payments in a calendar year may not exceed $5,000,000. A public utility, as defined in GS 62-3(23) is not eligible for this credit.
Enacting Legislation: S.L. 1979-801; S.L. 1993-674 limited the primary source of fuel to natural gas, effective Jan. 1, 1998.
Estimate (in millions): Unavailable
40. Credit for Costs at NC Ports
Citation: G.S. 105-130.41
Description: Credit for loading or unloading cargo at a State-owned port terminal at Wilmington or Morehead City. The credit is equal to the excess of the wharfage, handling, and throughput charges for the current taxable year over the average amount for the current year and the two preceding years. The credit applies to forest products, break-bulk cargo and container cargo. The credit may not exceed 50% of tax liability after other credits have been applied. Unused credits may be carried forward 5 years. The maximum cumulative credit for a corporation is $2 million.
Enacting Legislation: S.L. 1991-977 - effective for taxable years beginning on or after March 1, 1992
Sunset Date: Expires for taxable years beginning on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.5 FY14-15 ....... $0.3
Data Source: Department of Revenue "Economic Incentive Reports”
Corporation Income Tax
46
41. Credit for Manufacturing Cigarettes for Exportation
Citation: G.S. 105-130.45
Description: Credit of up to $6,000,000 is allowed a company that exports cigarettes to a foreign country through the North Carolina State Ports. The amount of the credit depends on the volume of cigarettes exported compared to the volume in a base year. The amount of credit taken in a given tax year may not exceed 50% of the taxpayer's tax liability, less other credits. Unused credits may be carried forward for 10 years.
Enacting Legislation: S.L. 1999-333 - effective for taxable years beginning on or after Jan. 1, 1999
Sunset Date: Expires effective for cigarettes exported on or after Jan. 1, 2018
Estimate (in millions): FY13-14 ........ $5.6 FY14-15 ....... $5.6
Data Source: Department of Revenue "Economic Incentive Reports”
42. Alternative Cigarette Export Credit
Citation: G.S. 105-130.46
Description: Credit of up to $10,000,000 is allowed a company that exports cigarettes to a foreign country through the North Carolina State Ports. The amount of the credit depends on the employment level at the company compared to the employment level in 2004. The amount of credit taken in a given tax year may not exceed 50% of the taxpayer's tax liability, less other credits. Unused credits may be carried forward for 10 years.
Enacting Legislation: S.L. 2003-435 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires effective for cigarettes exported on or after Jan. 1, 2018
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
43. Film Industry Production Expenses
Citation: G.S. 105-130.47
Description: A film or television production company that spends at least $250,000 in North Carolina on productions during the tax year is allowed a credit equal to up to 25% of the qualifying expenses. However, prior to January 1, 2010, the credit rate is 15%. A production company may include as qualifying expenses compensation paid to a highly compensated individual up to $1 million. The cost of production-related insurance coverage constitutes a qualifying expense as long as the coverage is not purchased form a related member. This tax credit is refundable if it exceeds income tax liability. The maximum credit for a feature film production is $20 million. No credit is allowed for productions related to political advertising, news programs, sporting events, or obscene material.
Enacting Legislation: S.L. 2005-276 - applies to qualifying expenses incurred on or after July 1, 2005; S.L. 2005-276 had a credit rate of 15% and a maximum credit for a feature film of $7,500,000. The tax credit replaced the film industry development grant program. S.L. 2009-529 created an alternative credit with credit rate of 25%, effective Jan. 1, 2010. S.L. 2010-147 increased the maximum credit for a feature film to $20 million. Corporation Income Tax
47
Sunset Date: Expires for qualifying expenses occurring on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $36.6 FY14-15 ....... $36.6
Data Source: Department of Revenue "Economic Incentive Reports”
44. Tax Credit for Recycling Oyster Shells
Citation: G.S. 105-130.48
Description: Taxpayers are allowed a credit of $1 per bushel of oyster shells donated to the Division of Marine Fisheries of the NC Department of Environmental and Natural Resources. The credit is not refundable. Any unused credit can be carried forward for the succeeding five years. A taxpayer who claims this credit must add back to taxable income any amount deducted under the Code for the donation of oyster shells.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires for taxable years beginning on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ < $0.1 FY14-15 ....... $0
Data Source: Department of Revenue tax data
Business and Energy Tax Credits
48
Methodology Note for all Business Incentive Credits (Article 3B through 3K):
In general, all of the tax credits in this chapter and the following, through the chapter on the Tax Incentives for Railroad Intermodal Facilities (Article 3K), share certain attributes that affect estimation of fiscal year budget effects. For instance, taxpayers may take credits only up to 50% of their net franchise tax or income tax liability for the year (with the exception of the refundable low-income housing credits and the credit for major computing manufacturing facilities). Also, in some cases the credits generated in a given year must be taken in installments over several succeeding years. These attributes can create a large difference in the amount of credits generated in a year and the amount of credits actually taken.
The estimates are based on Economic Incentive Reports produced by the N.C. Department of Revenue covering returns up through those processed in 2012, most of which were tax year 2011 forms. The reports provide detailed information on credits generated and credits taken by taxpayer and by Development Tier when applicable. These reports are available on the North Carolina Department of Revenue website.
1. Credit for Investing in Renewable Energy Property
Citation: G.S. 105-129.16A
Description: If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State, the taxpayer is allowed a credit equal to 35% of the cost of the property. The credits may not exceed (1) $2,500,000 for property that serves a business purpose, (2) $5,000,000 for business-related property in an Eco-Industrial Park, (3) $1,400 for solar energy equipment for residential water heating, (4) $3,500 for residential space heating, (5) $8,400 per installation of a geothermal heat pump or geothermal equipment, (6) $10,500 per installation of all other non-business renewable energy property. If the renewable property is placed in a non-business structure, the credit is taken in the year of installation. For other types of property, the credit must be taken in 5 annual installments, beginning in the year of installation.
Enacting Legislation: S.L. 1999-342; replaced various tax credits for renewable energy that were enacted in the 1970s and 1980s
Sunset Date: Expires for renewable energy property placed into service on or after Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $52.4 FY14-15 ....... $58.3
Data Source: Department of Revenue "Economic Incentive Reports”
Business and Energy Tax Credits
49
A note concerning the following three tax credits: the term “renewable fuels” refers to biodiesel, biodiesel mixes, and ethanol mixes that contain at least 70% ethanol by volume (G.S. 105-129.15(8)).
A taxpayer cannot claim the credits allowed under G.S. 105-129.16D(b) and G.S. 105-129.16D(b1) with respect to the same facility. A taxpayer that claims any other tax credit allowed under Chapter 105 with respect to the costs of constructing and installing a renewable energy facility may not take the credits allowed in this section with respect to the same costs.
2. Credit for Renewable Fuel Dispensing Facilities
Citation: G.S. 105-129.16D(a)
Description: A taxpayer that constructs and installs and places in service in this State a qualified commercial facility for dispensing renewable fuel is allowed a credit equal to 15% of the cost to the taxpayer of constructing and installing the part of the dispensing facility, including pumps, storage tanks, and related equipment, that is directly and exclusively used for dispensing or storing renewable fuel. This credit must be taken in 3 annual installments.
Enacting Legislation: S.L. 2004-153 - effective for taxable years beginning on or after Jan.1, 2005
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014
Estimate (in millions): less than $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
3. Credit for Constructing Renewable Fuel Processing Facilities
Citation: G.S. 105-129.16D(b)
Description: A taxpayer that constructs and places in service in this State a commercial facility for processing renewable fuel is allowed a credit equal to 25% of the cost to the taxpayer of constructing and equipping the facility. The credit must be taken in 7 annual installments. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 2004-153 - effective for taxable years beginning on or after Jan.1, 2005
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014. However, the sunset is extended to Jan. 1, 2017 if the taxpayer (1) signs a letter of commitment with the Department of Commerce on or before Sept. 1, 2013, stating the taxpayer's intent to construct and place into service in this State a commercial facility for processing renewable fuel and (2) begins construction of the facility on or before Dec. 31, 2013 (S.L. 2013-363).
Estimate (in millions): FY13-14 ........ $0.2 FY14-15 ....... $0.2
Data Source: Department of Revenue "Economic Incentive Reports”
Business and Energy Tax Credits
50
4. Alternate Credit for Constructing Renewable Fuel Facilities
Citation: G.S. 105-129.16D(b1)
Description: A taxpayer that invests at least $400,000,000 to construct and place in service in this State three or more commercial facilities for processing renewable fuel may receive a credit of 35% of the cost of constructing and equipping the facilities. The tax credit is taken in 7 equal installments and unused credits may be carried forward for 10 years. This credit may only be taken against the corporate income tax.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2006
Sunset Date: Expires for facilities placed into service on or after Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
5. Tax Credit to Refund Motor Fuel Excise Tax for Biodiesel
Citation: G.S. 105-129.16F
Description: A biodiesel provider that produces at least 100,000 gallons of biodiesel per year may receive a credit equal to the per gallon excise tax paid under Article 36C of Chapter 105. The credit does not apply to tax paid on diesel fuel included in a biodiesel blend. The maximum credit is $500,000.
Enacting Legislation: S.L. 2006-66 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.1 FY14-15 ....... < $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
6. Work Opportunity Tax Credit
Citation: G.S. 105-129.16G
Description: A taxpayer who is allowed a federal tax credit under Part IV, Subpart F of the Code for the taxable year is allowed a credit against the tax imposed by this Part. The credit is equal to six percent (6%) of the amount of credit allowed under the Code for wages paid related to positions located in North Carolina.
Enacting Legislation: S.L. 2007-323 - effective for taxable years beginning on or after Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.8 FY14-15 ....... < $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
Note: The wages pertaining to this credit were previously deductible from NC taxable income under G.S. 105-130.5(b)(11) and G.S. 105-134.6(d)(2). The elimination of this deduction has been netted out of the estimate.
Business and Energy Tax Credits
51
7. Credit for Donations to a Nonprofit to Acquire Renewable Energy Property
Citation: G.S. 105-129.16H
Description: A taxpayer who donates money to a nonprofit organization or a unit of State or local government is allowed a credit if the funds are used by the donee to construct, purchase, or lease renewable energy property. The taxpayer may claim a tax credit equivalent to that given under G.S. 105-129.16A. The donation cannot be deducted as a charitable donation from the taxable income of the taxpayer.
Enacting Legislation: S.L. 2007-397 - effective for taxable years beginning on or after Jan. 1, 2008
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): less than $0.1
Data Source: Department of Revenue "Economic Incentive Reports”
8. Credit for a Renewable Energy Property Facility
Citation: G.S. 105-129.16I
Description: A taxpayer that places in service in this State a commercial facility for the manufacture of renewable energy property or a major component subassembly for a solar array or wind turbine is allowed a credit of 25% of the cost to construct/convert and equip the facility. The credit is taken in 5 annual installments.
Enacting Legislation: S.L. 2010-167 - effective for taxable years beginning on or after Jan. 1, 2011; a similar tax credit had existed as G.S. 105-130.28, which was enacted by S.L. 1981-921 and expired on Jan. 1, 2006
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $2.0 FY14-15 ....... $2.0
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Incentives for Recycling Facilities
52
See Methodology Note under Article 3B.
1. Credit for Investing in Major Recycling Facility
Citation: G.S. 105-129.27
Description: An owner that purchases or leases machinery and equipment for a major recycling facility in this State is allowed a credit equal to 50% of the amount payable by the owner during the taxable year to purchase or lease the machinery and equipment. Unused credits may be carried forward 25 years.
Enacting Legislation: S.L. 1998-55 - effective for taxable years beginning on or after Jan. 1, 1998
Estimate (in millions): FY13-14 ........ $3.2 FY14-15 ....... $3.7
Data Source: Department of Revenue "Economic Incentive Reports”
Historic Rehabilitation Tax Credits
53
See Methodology Note under Article 3B.
1. Credit for Rehabilitating Income-Producing Historic Structure
Citation: G.S. 105-129.35
Description: A taxpayer who is allowed a federal income tax credit under Section 47 of the Code for making qualified rehabilitation expenditures for a certified historic structure located in this State is allowed a credit equal to 20% of the expenditures that qualify for the federal credit. The tax credit is 40% if the certified historic structure is a facility that at one time served as a State training school for juvenile offenders. The tax credit is taken in 5 annual installments. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 1993-527 - effective for taxable years on or after Jan. 1, 1994; S.L. 1997-139 increased the credit from 5% to 20%; S.L. 2006-40 added the 40% credit
Sunset Date: Expires for qualified rehabilitation expenses incurred on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $8.0 FY14-15 ....... $6.8
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Rehabilitating Nonincome-Producing Historic Structure
Citation: G.S. 105-129.36
Description: A taxpayer who is not allowed a federal income tax credit under Section 47 of the Code and who makes rehabilitation expenses for a State-certified historic structure located in this State is allowed a credit equal to 30% of the rehabilitation expenses. The tax credit is 40% if the certified historic structure is a facility that at one time served as a State training school for juvenile offenders. To qualify for the credit, the taxpayer's expenses must exceed $25,000 within a 24-month period. The tax credit is taken in 5 annual installments. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward for 5 years.
Enacting Legislation: S.L. 1997-139 - effective for taxable years beginning on or after Jan. 1, 1998; S.L. 2006-40 added the 40% credit
Sunset Date: Expires for qualified rehabilitation expenses incurred on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $5.7 FY14-15 ....... $4.8
Data Source: Department of Revenue "Economic Incentive Reports”
Low-Income Housing Tax Credits
54
See Methodology Note under Article 3B.
1. Credit for Low-Income Housing Awarded a Federal Credit Allocation before Jan. 1, 2003
Citation: G.S. 105-129.41
Description: A taxpayer that is allowed a federal income tax credit for low-income housing under Section 42 of the Code with respect to a qualified North Carolina low-income building is allowed a credit equal to a percentage of the federal credit. The credit must be taken in equal installments over 5 years and is limited to 50% of tax liability for the year claimed. Any unused credits may be carried forward for 5 succeeding years.
Enacting Legislation: S.L. 1999-360 - effective Jan. 1, 2000
Estimate (in millions): FY13-14 ........ < $0.1 FY14-15 ....... $0
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Low-Income Housing Awarded a Federal Credit Allocation on or after Jan. 1, 2003
Citation: G.S. 105-129.42
Description: A taxpayer that is allowed a federal income tax credit for low-income housing under Section 42 of the Code to construct or substantially rehabilitate a qualified North Carolina low-income housing development is allowed a credit equal to a percentage of the development's qualified basis. The percentage varies from 10% to 30%, depending on (1) the percentage of residential units that are affordable to low-income groups and (2) the income of the county or city where the housing is located. This credit may be refunded or may be used to generated a loan from the North Carolina Housing Finance Agency.
Enacting Legislation: S.L. 2002-87 - effective Jan. 1, 2003
Sunset Date: Expires for developments to which federal credits are allocated on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $50.0 FY14-15 ....... $41.0
Data Source: Department of Revenue "Economic Incentive Reports”
Research & Development Credits
55
See Methodology Note under Article 3B.
1. Small Business R&D Credit
Citation: G.S. 105-129.55(a)(1)
Description: A small business thas has qualified North Carolina research expenses for the taxable year is allowed a credit equal to 3.25% of the expenses. A small business is defined as a business whose annual receipts did not exceed $1 million. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $0.3 FY14-15 ....... $0.4
Data Source: Department of Revenue "Economic Incentive Reports”
2. Low-Tier R&D Credit
Citation: G.S. 105-129.55(a)(2)
Description: A taxpayer that performs research in a development tier one area is allowed a 3.25% credit for eligible expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $3.4 FY14-15 ....... $3.5
Data Source: Department of Revenue "Economic Incentive Reports”
3. University Research Credit
Citation: G.S. 105-129.55(a)(2a)
Description: A taxpayer that has NC university research expenses for the taxable year is allowed a credit equal to 20% of the expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $0.7 FY14-15 ....... $0.7
Data Source: Department of Revenue "Economic Incentive Reports” Research & Development Credits
56
4. Eco-Industrial Park R&D Credit
Citation: G.S. 105-129.55(a)(2b)
Description: A taxpayer that performs research in an Eco-Industrial Park certified under G.S. 143B-437.08 is allowed a 35% credit for eligible expenses. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carried forward 15 years.
Enacting Legislation: S.L. 2010-147 - effective for taxable years beginning on or after Jan. 1, 2011
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): Unavailable
Data Source: Department of Revenue "Economic Incentive Reports”
Note: No credits have been taken through tax year 2011.
5. Other R&D Credit
Citation: G.S. 105-129.55(a)(3)
Description: A taxpayer that has qualified North Carolina research expenses not covered under another subdivision of this section is eligible for 1.25% credit on expenses up to $50 million; 2.25% of expenses between $50 million and $200 million; and 3.25% of expenses over $200 million. The amount of credit taken in any tax year cannot exceed 50% of the taxpayer's tax liability after other credits taken. Unused credits can be carrried forward 15 years.
Enacting Legislation: S.L. 2004-124 - effective for business activities occurring on or after May 1, 2005
Sunset Date: Expires Jan. 1, 2016
Estimate (in millions): FY13-14 ........ $40.1 FY14-15 ....... $42.1
Data Source: Department of Revenue "Economic Incentive Reports”
6. Interactive Digital Media Credit
Citation: G.S. 105-129.56
Description: A taxpayer that develops in this State interactive digital media or a digital platform or engine for use in interactive digital media is allowed a credit of 15% of eligible expenses over $50,000. The credit is 20% for allowable expenses paid to a community college or a research university. The credit may not exceed $7.5 million per taxpayer. The amount of credit taken in a tax year is limited to 50% of a taxpayer's tax liability after other credits taken. Unused credits may be carried forward 15 years.
Enacting Legislation: S.L. 2010-147 - effective for taxable years beginning on or after Jan. 1, 2011
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $2.9 FY14-15 ....... $2.2
Data Source: Department of Revenue "Economic Incentive Reports”
Mill Rehabilitation Tax Credit
57
See Methodology Note under Article 3B.
1. Credit for Income-Producing Rehabilitated Mill Property
Citation: G.S. 105-129.71
Description: A taxpayer who makes qualified rehabilitation expenditures for a certified historic mill or agricultural warehouse located in this State is allowed a credit equal to 40% of the expenditures if the building is located in a Development Tier 1 or 2 area or 30% if the building is located in a Development Tier 3 area. A certificate from the State Historic Preservation Officer must be obtained which shows that the expenditures qualified for a Federal rehabilitation credit under section 47 of the Code and that the expenses exceeded $3,000,000. Unused credits can be carried forward for 9 years.
Enacting Legislation: S.L. 2006-40 - effective for taxable years beginning on or after Jan. 1, 2006 and applies to eligible sites placed into service on or after July 1, 2006
Sunset Date: Expires for projects for which an application for an eligibility certification is submitted on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $12.5 FY14-15 ....... $9.0
Data Source: Department of Revenue "Economic Incentive Reports”
2. Credit for Nonincome-Producing Rehabilitated Mill Property
Citation: G.S. 105-129.72
Description: A taxpayer who makes qualified rehabilitation expenditures for a certified historic mill or agricultural warehouse located in this State is allowed a credit equal to 40% of the expenditures if the building is located in a Development Tier 1 or 2 area. A certificate from the State Historic Preservation Officer must be obtained which shows that the expenditures are for a certified historic structure and that the expenses exceeded $3,000,000. This credit must be taken in 5 annual installments. Unused credits may be carried forward 9 years.
Enacting Legislation: S.L. 2006-40 - effective for taxable years beginning on or after Jan. 1, 2006 and applies to eligible sites placed into service on or after July 1, 2006
Sunset Date: Expires for projects for which an application for an eligibility certification is submitted on or after Jan. 1, 2015
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.5
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Credits for Growing Businesses
58
See Methodology Note under Article 3B.
Eligible businesses: These credits are only available to establishments whose primary business is one of the following: (1) air courier services hub, (2) aircraft maintenance and repair, (3) company headquarters that creates at least 75 additional jobs, (4) customer service call center, (5) electronic shopping and mail order house, (6) information technology and services, (7) manufacturing, (8) motorsports facility, (9) motorsports racing team, (10) research and development, (11) warehousing, and (12) wholesale trade.
Other eligibility conditions: The companies that qualify for these credits must meet certain eligibility requirements as laid out in G.S. 105-129.83. Establishments must generally meet wage standards, provide health insurance, have no outstanding citations related to environmental impacts and safety and health, and have no overdue tax debts.
Development tiers: Different credit rates and other conditions apply to businesses located in the three development tier zones. The designation of tiers is determined according to G.S. 143B-437.08.
Installments: Taxpayers generating credits under this article must take the credits in annual installments, beginning in the tax period following the period for which the credits were generated. There are 4 installments for the credits under G.S. 105-129.87 and G.S. 105-129.88 and 7 installments for credits under G.S. 105-129.89.
Carry-forwards: Unused credits under G.S. 105-129.87 and G.S. 105-129.88 may be carried forward for 5 years; unused credits under G.S. 105-129.89 may be carried forward for 15 years. Under certain conditions, a taxpayer may be eligible to take the carry-forwards for 20 years.
1. Credit for Creating Jobs
Citation: G.S. 105-129.87
Description: An eligible taxpayer is allowed a credit for creating jobs in this State. The amount of the credit is dependent on the development tier of the county in which the jobs are located. Additional credits are available for companies that create jobs in an urban progress zone, port enhancement zone or agrarian growth zone, as well as for new hires who reside in one of the zones or who were unemployed for at least 26 weeks before the date of hire.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $21.4 FY14-15 ....... $25.5
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Credits for Growing Businesses
59
2. Credit for Investing in Business Property
Citation: G.S. 105-129.88
Description: An eligible taxpayer is allowed a credit for placing business property in this State. The amount of the credit is dependent on the development tier of the county in which the property is located. Additional credits are available for companies that place business property in an urban progress zone, port enhancement zone or agrarian growth zone.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $54.9 FY14-15 ....... $60.4
Data Source: Department of Revenue "Economic Incentive Reports”
3. Credit for Investing in Real Property
Citation: G.S. 105-129.89
Description: An eligible taxpayer that purchases or leases real property in this State is allowed a credit equal to 30% of the eligible investment amount. The credit is applicable only for investments in a development tier 1 area.
Enacting Legislation: S.L. 2006-252 - effective Jan. 1, 2007
Sunset Date: Expires Jan. 1, 2014
Estimate (in millions): FY13-14 ........ $0.6 FY14-15 ....... $0.7
Data Source: Department of Revenue "Economic Incentive Reports”
Tax Incentives for Railroad Intermodal Facilities
60
See Methodology Note under Article 3B.
1. Credit for Constructing a Railroad Intermodal Facility
Citation: G.S. 105-129.96
Description: A taxpayer that constructs or leases an eligible railroad intermodal facility in this State and places it in service during the taxable